<PAGE>
LINCOLN LIFE(TM)
Emancipator
Life Annual
Report
1995
<PAGE>
LINCOLN LIFE(TM)
January 1996
Dear Emancipator Life Policyholder:
1995 was a very prosperous year for most investors. The year saw a dramatic
continuation of the rally in the financial marketplace that began in late 1994.
The performance of the funds underlying the Emancipator Life subaccounts
reflects 1995's strong investment markets.
The following table shows the change in unit values of the subaccounts over
several time periods. These figures are slightly different from those appearing
in the accompanying report as they reflect the deduction of asset charges
associated with your policy.
<TABLE>
<CAPTION>
Percent change in unit values
Periods ended 12/31/95
------------------------------------------
5-year average Since inception
Emancipator Life subaccounts 1 year annual compound 2/6/87
- --------------------------------------------------------------------------
<S> <C> <C> <C>
Bond Fund 18.38% 9.50% 8.12%
Growth and Income Fund 37.51 15.50 11.64
Managed Fund 28.49 11.66 9.26
Money Market Fund* 5.02 3.64 5.12
Special Opportunities Fund 31.01 18.39 12.21
</TABLE>
The rates of return shown in the above table reflect the percentage change in
unit values of the Separate Account, and represent the gross investment results
of the subaccounts minus the asset management charges and any miscellaneous
expenses incurred by the funds, and minus the mortality and expense risk charges
made by the Separate Account.
The positive performance of the subaccounts in 1995, in comparison to the
relatively poor performance of 1994, illustrates the importance of keeping a
long-term perspective and maintaining a well-diversified portfolio. As we've
mentioned in previous reports, it is important that your allocations among the
available investment options are consistent with your individual risk tolerance
and your long term investment horizon.
* An investment in the Money Market Fund is neither insured nor guaranteed by
the U.S. Government. There can be no assurance that the subaccount will maintain
a stable $1.00 share price.
<PAGE>
The next several pages contain performance and investment commentary from the
investment management firms. More detailed information about the five underlying
funds follows the commentary.
Your decision to select one of our variable insurance products was well rewarded
in 1995 and we appreciate the opportunity to help you achieve your financial
security goals. Thank you again for placing your confidence in Lincoln Life. If
we can be of further service, please call one of our customer service
representatives on our toll free number - 1-800-348- 0851.
Sincerely,
/s/ Kelly D. Clevenger /s/ Edward B. Martin, CLU
Kelly D. Clevenger Edward B. Martin, CLU
Vice President Vice President
Note: The investment return and principal value of an investment may fluctuate
so that an investor's shares, when redeemed, may be worth more or less than the
original cost.
<PAGE>
HOW A $10,000 INVESTMENT HAS GROWN
The following charts show the growth of $10,000 invested in each of the
investment portfolios. However, the variable annuity and life insurance
contracts that use these funds have certain fees and expenses not reflected
here.
BOND FUND
<TABLE>
<CAPTION>
[CHART SHOWING]
Growth of $10,000 invested 1/1/86 through 12/31/95
[APPEARS HERE]
1/1/86 12/31/95
------- --------
<S> <C> <C>
Bond Fund........................................ $10,000 $24,751
Lehman Brothers Government/Corporate Bond Index.. $10,000 $25,117
</TABLE>
Throughout the financial markets, 1995 was an outstanding year. In a bull market
in which yields plummeted by approximately 2-21/2% across most of the treasury
curve, the Bond Fund outperformed relative to its peers.
A variety of factors helped to drive the bull run in the bond and stock markets
in 1995. The Mexican peso devaluation in December of 1994 and the negative
publicity from the Orange County and Barings investment losses, related to
speculative derivatives, helped set the stage for the 1995 rebound. Tightening
of monetary policy by the Federal Reserve during 1994 began to impact the
economy in 1995, as the economy experienced a "soft landing" consisting of slow
economic growth and low inflation. Finally, based in part on the Republican
landslide in the 1994 elections, the markets rallied throughout the year on
expectations of deficit reduction.
The Fund employed several key strategies during the year which enhanced
portfolio returns. To take advantage of the soft landing, a strategy
of aggressively taking more credit risk was utilized. The Fund's exposure in
several sectors, including airlines and media, improved performance during the
year. Confident of a rebound in interest rates, we remained at longer durations
than our benchmark. This strategy was highly effective as the long bond rallied
throughout the year resulting in price appreciation for the Fund. In
anticipation of spread widening in the mortgage backed securities market, we
maintained a modest exposure to this sector.
We look for 1996 to be a year of continued slow economic growth and moderate
inflation. Although the bond market will not be able to repeat the extremely
strong performance of 1995, a favorable environment for fixed income securities
should exist as the Federal Reserve is likely to continue to ease interest
rates.
Tim Policinski
Lincoln Investment Management Co.
GROWTH AND INCOME FUND
<TABLE>
<CAPTION>
[CHART SHOWING]
Growth of $10,000 invested 1/1/86 through 12/31/95
[APPEARS HERE]
1/1/86 12/31/95
------- --------
<S> <C> <C>
Growth Fund...................................... $10,000 $37,174
S&P 500 Index.................................... $10,000 $40,043
</TABLE>
Stocks provided extraordinary gains this year as the S&P 500 Index returned
37.6%. At the beginning of the year, the economic soil did not seem rich enough
to yield such a bountiful crop of returns. The Federal Reserve had aggressively
raised interest rates to cut off a perceived threat of inflation. This
tightening action was intended to slow down the economy and, in
<PAGE>
turn, may have tamed corporate profits. Quite to the contrary, while growth in
Gross Domestic Product decreased early in the year, corporate profits were
robust, surpassing the average expectations. These strong earnings fueled the
stock market returns early in the year. Later in the year, while earnings
continued to grow, the Federal Reserve lowered interest rates. This action
boosted both the stock and bond markets.
Separate from the impact of raw earnings and economic forces on the market,
speculation and politics also played a role in the market's dramatic rise.
Technology stocks were hot. In part, the phenomenon of the Internet and the
convenience and affordability of high powered computers drove technology stocks
higher. However, politics played a role in that technology stocks generally do
not pay dividends and they would benefit from the anticipated capital gains tax
cut proposed by Congress.
The Growth and Income Fund had a strong year, outpacing the vast majority of
similar funds. While the economic environment at the beginning of the year did
not seem positive for stocks, investors with a long term perspective were
rewarded for investing in the Growth & Income Fund and participating fully in
the rally of 1995.
T. Scott Wittman
Vantage Global Advisors
MANAGED FUND
<TABLE>
<CAPTION>
[CHART SHOWING]
Growth of $10,000 invested 1/1/86 through 12/31/95
[APPEARS HERE]
1/1/86 12/31/95
------- --------
<S> <C> <C>
Managed Fund..................................... $10,000 $28,689
Lehman Brothers Government/Corporate Bond Index.. $10,000 $25,117
S&P 500 Index.................................... $10,000 $40,043
</TABLE>
Last year's performance was in sharp contrast to that of 1994. Funds investing
in a mix of stocks and bonds should have performed well. The bond market as
measured by the Lehman Government/Corporate Bond Index recorded its third best
return since the index's inception in 1973. The S&P 500 performance in 1995 was
the best over that same time period.
As we entered 1995 many analysts were convinced that the Fed would continue on
its tightening agenda which began a year earlier. The Fed did indeed push up
rates in February, but ultimately the market came to realize that inflationary
pressures were under control. As the engineered "soft landing" actually evolved,
the Fed was able to lower short rates in July and again in December. The long
end of the interest rate curve was helped by foreign purchases of U.S.
securities and the renewed confidence that inflation was under control. Equity
markets were the beneficiary of lower interest rates and surprisingly good
earnings reports. Large capitalized issues generally did better than the smaller
growth stocks, although there was some exceptional performance in technology and
biotech firms.
During the year we maintained a nearly fully invested position with a heavier
allocation towards equities. As we anticipated a decline in interest rates, our
bond manager increased duration versus the index. Cash was generally minimal
throughout the year, but was employed in barbell strategies in conjunction with
longer maturity instruments.
The Fund's asset allocation as of 12/31/95 in the Managed Fund was: Stocks
51.48%, Bonds 43.87% and Money Markets 4.65%. The Managed Fund's performance for
1995 was more than 27% compared to the S&P 500 Index of 37.50% and the Lehman
Government/Corporate Bond Index of 19.24% for the year.
<PAGE>
It is not unusual for an excellent year in the stock market to be followed by
reasonably positive returns, but that is not necessarily the case for bonds. We
believe that inflation will remain under control in the near term, thus
providing a safety valve for bonds. Our major concern is the budget impasse,
which to date has had some negative impact on stock and bond prices, and which
could add volatility depending on its resolution. Given our outlook on the
economy and markets we expect to maintain a fully invested position with a
slight bias towards equities.
Jay Yentis
Lincoln Investment Management Co.
SPECIAL OPPORTUNITIES FUND
<TABLE>
<CAPTION>
[CHART SHOWING]
Growth of $10,000 invested 1/1/86 through 12/31/95
[APPEARS HERE]
1/1/86 12/31/95
------- --------
<S> <C> <C>
Special Opportunities.............................. $10,000 $31,472
S&P Mid-Cap Index.................................. $10,000 $42,018
</TABLE>
The stock market had a remarkable year in 1995 with larger stocks leading the
way. The Dow Jones Industrial Average broke through the 4000 mark early in the
year and surged straight through the 5000 mark by November. Larger stocks, as
represented by the S&P 500 returned 37.6% while the Russell 2000 which is
comprised of mostly smaller stocks returned 28.4%. In both cases, the returns
were well above historical averages. The Special Opportunities Fund which
invests in mid-sized companies performed in line with these benchmarks with a
return for the year in between the S&P 500 and the Russell 2000.
Throughout 1994 and into 1995, the Federal Reserve had been raising interest
rates, attempting to accomplish a "soft landing," (i.e. slow the economy without
causing a recession.) Some say Alan Greenspan and his associates have achieved
this objective as growth in
GDP had decreased but remains positive. Greenspan's intention was to slow the
economy to fight off the threat of inflation. At this point inflation appears to
be in check.
Given this action by the Fed and the economic consequences, investors steered
toward issues that were less likely to be affected by an economic downturn.
Large consumer non-cyclicals such as tobacco and pharmaceutical companies
performed exceptionally well. Large companies were further bolstered by a flurry
of mergers and acquisitions in the banking industry with financial companies in
general outpacing the averages substantially. In contrast, economically
sensitive companies such as small retailers were weak.
Historically, smaller companies have provided a higher long term return. The
underperformance of smaller companies last year was due largely to the economic
uncertainty early in the year. The Special Opportunities Fund is designed to
capture the additional long term return opportunities of smaller companies and
has provided competitive returns relative to its peers and relevant mid-cap
indices.
T. Scott Wittman
Vantage Global Advisors
First time use with the public February 1996.
<PAGE>
Lincoln National Bond Fund, Inc.
<TABLE>
<CAPTION>
<S> <C> <C>
Statement of Net Assets
December 31, 1995
Investments
Par Market
Long-Term Debt Investments: Amount Value
---------- -----------
U.S. Government and Agency Obligations: 31.9%
- -------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp.
7.3%, 12/15/12 $2,994,978 $3,191,149
3.5%, 12/15/21 2,000,000 1,618,220
FNMA
7.6%, 7/25/05 1,682,028 1,711,363
7.125%, 10/1/05 2,595,275 2,777,670
6.665%, 11/1/05 999,291 1,034,756
6.66%, 12/1/05 2,000,000 2,066,120
6.8%, 8/1/15 955,839 991,253
7.15%, 10/1/15 2,989,283 3,032,209
8.0%, 4/1/17 458,159 478,209
7.0%, 10/1/25 2,994,533 3,016,992
FNMA Prinicpal Strip Step Up Cpn*
7.56%, 12/20/01 4,000,000 3,774,800
GNMA
9.0%, 5/15/17 257,499 274,136
9.0%, 9/15/19 975,753 1,037,089
6.5%, 11/15/23 957,876 952,741
Tennesse Valley Authority Generic*
0.0%, 11/1/00 9,500,000 7,246,600
U.S. Treasury Strips*
9.875%, 5/15/08 48,000,000 23,354,880
U.S. Treasury Bonds
12.0%, 8/15/13 500,000 771,714
8.0%, 11/15/21 6,500,000 8,135,140
U.S. Treasury Notes
6.0%, 6/30/96 3,000,000 3,011,250
7.88%, 11/15/04 10,000,000 11,581,200
- -------------------------------------------------------------------------------
80,057,491
Collateralized Mortgage Obligations: 1.4%
- -------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp. Series 58
8.0% CMO, 4/15/16 1,383,671 1,414,458
Mid State Trust III
9.625%, 4/1/22 321,520 331,323
Prudential Home Mortgage
6.7%, 11/25/07 1,500,000 1,517,160
Resolution Trust Corp.
9.0%, 9/25/28 241,831 249,756
- -------------------------------------------------------------------------------
3,512,697
Indexed Securities: 1.4%
- -------------------------------------------------------------------------------
Caterpillar Financial Services Corp. *
4.25%, 1/8/96, coupon inversely
indexed to 2 year Italian swap
rate multiplied by 5.11. 3,500,000 3,476,900
- -------------------------------------------------------------------------------
Air Transportation: 2.1%
- -------------------------------------------------------------------------------
American Airlines Equipment Trust
10.18%, 1/2/13 1,500,000 1,881,855
Delta Air Lines Inc.
8.25%, Med. Term Note, 12/27/07 1,500,000 1,747,020
United Airline Inc. Equipment Trust
9.35%, 4/7/16 1,500,000 1,718,145
- -------------------------------------------------------------------------------
5,347,020
Aluminum: 0.3%
- -------------------------------------------------------------------------------
Alcan Aluminum LTD - Debentures
9.7%, 10/15/96 250,000 257,955
8.875%, 1/15/22 500,000 555,100
- -------------------------------------------------------------------------------
813,055
Banking and Insurance: 7.6%
- -------------------------------------------------------------------------------
Ahmanson HF & Co.
8.25%, 10/1/02 2,000,000 2,205,740
Banc One Corp.
9.875%, 3/1/09 500,000 647,965
Barclays Bank Services
3.56%, 2/14/49 2,000,000 1,705,000
Barnett Banks Inc. Note
6.5%, 9/1/05 1,500,000 1,563,705
First America Bank Corp.
7.75% Subordinated Note, 7/15/04 2,000,000 2,186,860
First Bank System Inc.
6.875% Subordinated Note, 9/15/07 1,000,000 1,042,310
First Union Corp.
8.0%, 8/15/09 2,000,000 2,247,240
First USA Bank
5.75%, 1/15/99 2,000,000 1,989,920
Fleet Financial Group
7.65%, 9/1/99 1,000,000 1,046,880
Fleet/Norstar Financial Group Inc.
7.65%, 3/1/97 500,000 510,635
Great Western Bank
10.25% Subordinated Notes, 6/15/00 500,000 558,900
Harris Bankcorp Inc.
9.375% Subordinated Notes, 6/1/01 250,000 287,858
National Westminster Bancorp
3.69%, 7/30/49 3,000,000 2,512,500
National Westminster Bank p.l.c.
9.45% Debentures, 5/1/01 500,000 577,820
- -------------------------------------------------------------------------------
19,083,333
Broadcasting: 0.2%
- -------------------------------------------------------------------------------
Viacom Inc.
8.75%, 5/15/01 500,000 511,250
- -------------------------------------------------------------------------------
Building Materials: 0.5%
- -------------------------------------------------------------------------------
Georgia Pacific Corp.
10.1%, 6/15/02 1,000,000 1,187,970
- -------------------------------------------------------------------------------
Entertainment: 1.3%
- -------------------------------------------------------------------------------
ITT Corp. Note
6.25%, 11/15/00 1,000,000 1,005,530
Time Warner Inc.
8.88%, 10/1/12 500,000 559,330
9.125%, 1/15/13 1,500,000 1,687,710
- -------------------------------------------------------------------------------
3,252,570
Finance: 8.3%
- -------------------------------------------------------------------------------
Aristar Finance
7.5% Senior Subordinated Note, 7/1/99 1,500,000 1,579,170
Avco Financial Services Inc.
7.25%, 7/15/99 1,000,000 1,047,760
Beneficial Corp.
9% Med. Term Notes, 1/19/96 1,250,000 1,252,813
Chrysler Financial Corp.
9.5%, 12/15/99 1,500,000 1,684,935
Discover Credit Corp.
8.73% Med. Term Note, 8/15/96 500,000 509,805
Dow Capital B V
9.0%, 5/15/10 3,000,000 3,636,030
Ford Motor Credit Co.
8.875% Med. Term Note, 5/1/96 2,000,000 2,022,540
General Motors Acceptance Corp.
7.85%, 11/15/97 1,500,000 1,558,650
8.88%, 6/1/10 1,500,000 1,826,670
Household Affinity Credit Card
6.05%, 5/15/01 1,000,000 1,007,520
Household Finance Corp.
9.63% Senior Subordinated Note, 7/15/00 875,000 999,748
International Lease Finance Co.
8.25%, 1/15/00 2,000,000 2,167,860
Salomon Inc.
7.25%, 1/15/00 1,000,000 1,022,350
Spiegel Charge Account Trust 2
6.95%, 12/17/01 500,000 510,264
- -------------------------------------------------------------------------------
20,826,115
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Par Market
Amount Value
--------- --------
Financial Services: 2.2%
- ------------------------------------------------------------------------
AT & T Capital Corp.
7.47%, 5/11/05 $2,750,000 $2,968,872
B.A.T. Capital Corp. Euro Bd (UK)
6.5%, 11/24/03 2,500,000 2,514,063
- ------------------------------------------------------------------------
5,482,935
Food and Beverage: 1.9%
- ------------------------------------------------------------------------
Coca Cola Enterprises Inc.
8.0%, 1/4/05 2,310,000 2,632,869
ConAgra Inc.
9.88%, 11/15/05 1,000,000 1,246,000
Nabisco Inc.
7.55%, 6/15/15 750,000 786,090
- ------------------------------------------------------------------------
4,664,959
Foreign Government: 2.1%
- ------------------------------------------------------------------------
Hydro-Quebec
7.2%, Med. Term Note 10/5/09 3,000,000 3,475,560
Manitoba (Province of)
7.75%, 7/7/26 1,500,000 1,688,970
- ------------------------------------------------------------------------
5,164,530
Machinery and Engineering: 1.0%
- ------------------------------------------------------------------------
Deere & Co.
8.27%, 8/8/95 2,000,000 2,401,440
- ------------------------------------------------------------------------
Metals and Mining: 3.0%
- ------------------------------------------------------------------------
Cyprus Amax Minerals Co. Note
7.375%, 5/15/07 2,500,000 2,670,324
Inco LTD Deb
9.6%, 6/15/22 1,300,000 1,499,810
Newmont Gold Co.
8.91%, 1/5/09 750,000 833,768
Noranda Inc.
8.13%, 6/15/04 2,000,000 2,220,380
Reynolds Metals Co.
9.0%, 8/15/03 250,000 292,468
- ------------------------------------------------------------------------
7,516,750
Miscellaneous: 1.1%
- ------------------------------------------------------------------------
Duquesne II Funding Corp.
8.7%, 6/1/16 2,474,000 2,771,969
- ------------------------------------------------------------------------
Motor Vehicles and Equipment: 0.4%
- ------------------------------------------------------------------------
General Motors Corp.
8.17%, 1/2/00 1,043,214 1,076,638
- ------------------------------------------------------------------------
Office and Business Equipment and Services: 0.2%
- ------------------------------------------------------------------------
Xerox Corp. - Euronote
8.375%, 9/25/96 500,000 505,745
- ------------------------------------------------------------------------
Paper: 1.5%
- ------------------------------------------------------------------------
Champion International Corp.
7.7%, 12/15/99 1,500,000 1,593,030
James River Corp. Note
6.7%, 11/15/03 2,000,000 2,026,160
- ------------------------------------------------------------------------
3,619,190
Petroleum and Petroleum Related: 3.1%
- ------------------------------------------------------------------------
Arkla Inc. Db
11/15/19 1,000,000 1,141,890
Atlantic Richfield Co.
10.25% Eurobond, 7/2/00 1,000,000 1,080,930
Enron Corp.
9.5%, 6/15/01 1,000,000 1,160,760
Noble Affiliates Inc.
7.25%, 10/15/23 600,000 611,418
Occidental Petroleum Corp.
11.75%, 3/15/11 2,000,000 2,113,360
Petro Canada - Debentures
8.6%, 10/15/01 1,500,000 1,670,895
- ------------------------------------------------------------------------
7,779,253
Public Utilities: 15.7%
- ------------------------------------------------------------------------
Carolina Power & Light Co.
9.0%, 4/1/22 $500,000 $534,625
Central Maine Power Co.
6.5%, 7/22/97 1,500,000 1,506,765
Cleveland Electric Illuminating Co.
8.26% Med. Term Note, 10/30/98 2,500,000 2,584,675
Commonwealth Edison Co.
9.375%, 2/15/00 500,000 557,020
Consumers Power Co.
8.75% 1st Mortgage, 2/15/98 1,000,000 1,049,680
8.875% 1st Mortgage, 11/15/99 1,000,000 1,088,090
Detroit Edison Co.
6.56%, 5/1/01 2,000,000 2,042,980
Great Lakes Power Inc.
9.0%, 8/1/04 1,500,000 1,684,680
GTE Hawaiian Telephone Co. Inc. Sr Db
7.0%, 2/1/06 2,000,000 2,097,200
Illinois Power Co.
5.85% 1st Mortgage Bonds, 10/1/9 625,000 625,363
Long Island Lighting Co.
9.63%, 7/1/24 500,000 529,995
National Rural Utilities Coop Fin Coll Tr
7.2%, 10/1/15 1,000,000 1,049,250
Nevada Power Co.
7.06%, 5/1/00 1,500,000 1,553,235
New Jersey Bell Telephone
7.85%, 11/15/29 1,950,000 2,317,517
Northeast Utilities Series A
8.58%, 12/1/06 948,571 1,053,057
Old Dominion Electric Co-op SE
8.76%, 12/1/22 1,600,000 1,890,240
Pacificorp
9.15% Med. Term Note, 8/9/11 2,000,000 2,496,540
Pennsylvania Power & Light
7.7%, 10/1/09 3,000,000 3,378,990
PSI Energy Inc.
8.56% Med. Term Note, 12/27/11 2,000,000 2,316,360
Public Service Co. of Colorado
6.375%, 11/1/05 1,500,000 1,487,370
Texas Gas Transmission Corp.
8.63%, 4/4/04 1,000,000 1,151,290
Texas Utilities Electric Co.
9.85%, 2/5/03 1,500,000 1,800,944
Utilicorp United Inc.
10.5%, 12/1/20 2,000,000 2,418,540
Washington Water & Power Co.
8.01%, 12/17/01 2,000,000 2,198,540
- ------------------------------------------------------------------------
39,412,946
Railroads: 0.8%
- ------------------------------------------------------------------------
Burlington Northern RR
6.94%, 1/2/14 500,000 524,930
Chicago & Northwestern Holdings Corp.
6.25%, 7/30/12 1,460,551 1,464,144
- ------------------------------------------------------------------------
1,989,074
Retail: 1.0%
- ------------------------------------------------------------------------
Sears,Roebuck & Co.
9.05%, 2/6/12 2,000,000 2,431,560
- ------------------------------------------------------------------------
Savings and Loan: 0.4%
- ------------------------------------------------------------------------
First Security Corp. Bd
7.0%, 7/15/05 1,000,000 1,042,870
- ------------------------------------------------------------------------
Securities Dealers: 1.7%
- ------------------------------------------------------------------------
Lehman Brothers Holding Co. Sr Note
8.875%, 3/1/02 1,000,000 1,117,000
Smith Barney Holdings
7.88%, 10/1/99 3,000,000 3,196,170
- ------------------------------------------------------------------------
4,313,170
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Par Market
Amount Value
----------- ------------
<S> <C> <C>
Telecommunications: 3.0%
- ------------------------------------------------------------------------
NYNEX Capital Funding
7.63%, 10/15/09 $3,000,000 $3,465,450
Nynex Corp.
9.55% Debentures, 5/1/10 1,638,700 1,949,528
Rochester Telephone Corp.
9.0% Med. Term Note, 7/19/00 2,000,000 2,246,140
- ------------------------------------------------------------------------
7,661,118
Transportation: 1.0%
- ------------------------------------------------------------------------
Federal Express Corp. Note
9.65%, 6/15/12 2,000,000 2,534,120
- ------------------------------------------------------------------------
Total Long-Term Debt Investments: 95.1%
(Cost $225,322,149) 238,436,668
- ------------------------------------------------------------------------
Money Market Instruments:
Idaho Power Co.
5.8%, 1/2/96 1,300,000 1,295,602
ITT-Hartford Group, Inc
5.8%, 1/2/96 6,900,000 6,888,883
Sumitomo Corp. Of America
6.0%, 1/2/96 6,000,000 5,992,000
UBS Finance Inc
6.0%, 1/2/96 10,100,000 10,088,217
- ------------------------------------------------------------------------
Total Money Market Instruments: 9.6%
(Cost $24,264,702) 24,264,702
- ------------------------------------------------------------------------
Total Investments: 104.7%
(Cost $249,586,851) 262,701,370
- ------------------------------------------------------------------------
Other Assets Under Liabilities (4.7%) (11,885,316)
- ------------------------------------------------------------------------
Net Assets: 100.0%
(equivalent to $12.247 per share
based on 20,480,316 shares
issued and outstanding) $250,816,054
========================================================================
Lincoln National Growth and Income
Fund, Inc.
Statement of Net Assets
December 31, 1995
Investments
Number Market
of Shares Value
Common Stocks: ----------- ------------
Aerospace: 1.4%
- ------------------------------------------------------------------------
McDonnell Douglas Corp. 270,900 $24,922,800
- ------------------------------------------------------------------------
Air Transportation: 0.6%
- ------------------------------------------------------------------------
AMR Corp.* 154,900 11,501,325
- ------------------------------------------------------------------------
Banking and Insurance: 10.6%
- ------------------------------------------------------------------------
AllState Corp. 480,049 19,742,015
American General Corp. 584,000 20,367,000
Bank of Boston Corp. 521,500 24,119,375
Bank of New York Inc. 502,500 24,496,875
Chemical Banking Corp. 458,800 26,954,500
Cigna Corp. 248,800 25,688,600
First Chicago NBD Corp. 615,943 24,329,749
NationsBank Corp. 227,500 15,839,687
Transamerica Corp. 104,300 7,600,863
Transport Holdings Inc.* 77 3,138
Travelers Inc. 83,500 5,250,062
- ------------------------------------------------------------------------
194,391,864
Broadcasting: 1.3%
- ------------------------------------------------------------------------
Capital Cities ABC Inc. 82,400 10,166,100
King World Productions Inc.* 328,900 12,785,988
- ------------------------------------------------------------------------
22,952,088
Building Materials: 0.7%
- ------------------------------------------------------------------------
Dover Corp. 334,200 $12,323,625
- ------------------------------------------------------------------------
Building and Construction: 0.4%
- ------------------------------------------------------------------------
Armstrong World Industries Inc. 114,900 7,123,800
- ------------------------------------------------------------------------
Chemicals: 3.1%
- ------------------------------------------------------------------------
Dow Chemical Co. 147,600 10,387,350
Du Pont E I De Nemours & Co. 248,300 17,349,962
Eastman Chemical Co. 82,900 5,191,613
Olin Corp. 171,400 12,726,450
Union Carbide Corp. 274,700 10,301,250
- ------------------------------------------------------------------------
55,956,625
Consumer Products and Services: 5.7%
- ------------------------------------------------------------------------
American Brands Inc. 133,500 5,957,437
Black & Decker Corp. 323,000 11,385,750
Omnicom Group Inc. 232,800 8,671,800
Philip Morris Co. Inc. 583,000 52,761,500
Procter & Gamble Co. 320,700 26,618,100
- ------------------------------------------------------------------------
105,394,587
Drug and Hospital Supplies: 8.3%
- ------------------------------------------------------------------------
Baxter International Inc. 637,500 26,695,313
Bristol Myers Squibb Co. 488,300 41,932,762
Lilly (Eli) & Co. 260,000 14,625,000
Merck & Co. Inc. 150,800 9,915,100
Pharmacia & Upjohn Inc.* 719,490 27,880,237
Schering-Plough Corp. 578,900 31,694,775
- ------------------------------------------------------------------------
152,743,187
Electrical and Electronics: 7.7%
- ------------------------------------------------------------------------
Alliance Semiconductor Corp.* 296,100 3,442,163
Applied Materials Inc.* 565,400 22,262,625
Arrow Electrics Inc.* 115,200 4,968,000
Avnet Inc. 239,400 10,713,150
General Electric Co. 563,500 40,572,000
Harris Corp. 306,300 16,731,637
Mentor Graphics Corp. * 411,200 7,504,400
Read Rite Corp.* 638,700 14,849,775
Teradyne Inc.* 568,000 14,200,000
Texas Instruments Inc. 100,100 5,180,175
- ------------------------------------------------------------------------
140,423,925
Entertainment: 2.1%
- ------------------------------------------------------------------------
Bally Entertainment Corp.* 555,500 7,777,000
Mattel Inc. 252,031 7,749,953
Mirage Resorts Inc.* 678,400 23,404,800
- ------------------------------------------------------------------------
38,931,753
Finance: 0.9%
- ------------------------------------------------------------------------
Household International Inc. 270,700 16,005,137
- ------------------------------------------------------------------------
Food and Beverage: 6.9%
- ------------------------------------------------------------------------
Campbell Soup Co. 70,300 4,218,000
Coca Cola Co. 329,700 24,480,225
ConAgra Inc. 331,900 13,690,875
CPC International Inc. 146,100 10,026,112
Heinz H.J. Co. 407,150 13,486,844
IBP Inc. 355,300 17,942,650
RJR Nabisco Holding Corp. 318,920 9,846,655
Safeway Inc.* 515,900 26,568,850
Universal Foods Corp. 142,600 5,721,825
- ------------------------------------------------------------------------
125,982,036
Industrial: 0.5%
- ------------------------------------------------------------------------
TRW Inc. 126,100 9,772,750
- ------------------------------------------------------------------------
Machinery and Engineering: 1.2%
- ------------------------------------------------------------------------
Novellus Systems Inc.* 394,300 21,292,200
- ------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Number Market
of Shares Value
------------- --------------
<S> <C> <C>
Metals and Mining: 2.2%
- --------------------------------------------------------------------------
Cyprus Amax Minerals Co. 413,200 $10,794,850
Parker Hannifin Corp. 261,950 8,971,787
Phelps Dodge Corp. 336,800 20,965,800
- --------------------------------------------------------------------------
40,732,437
Motor Vehicles and Equipment: 2.6%
- --------------------------------------------------------------------------
Eaton Corp. 373,100 20,007,488
Ford Motor Co. 405,400 11,756,600
Goodrich BF Co. 139,400 9,496,625
Navistar International Corp.* 679,900 7,138,950
- --------------------------------------------------------------------------
48,399,663
Office and Business Equipment and Services: 7.0%
- --------------------------------------------------------------------------
Adaptec Inc.* 200,400 8,216,400
Cadence Design Systems Inc.* 494,250 20,758,500
Cisco Systems Inc.* 150,300 11,216,138
Computer Associates International Inc. 95,300 5,420,187
Dell Computer Corp.* 626,200 21,682,175
Digital Equipment Corp.* 73,600 4,719,600
Manpower Inc. 213,100 5,993,437
Micron Technology Inc. 118,100 4,679,713
Reynolds & Reynolds Co. 209,200 8,132,650
Seagate Technology* 230,300 10,939,250
Sun Microsystems Inc.* 568,200 25,924,125
- --------------------------------------------------------------------------
127,682,175
Paper: 1.8%
- --------------------------------------------------------------------------
Bowater Inc. 546,800 19,411,400
Stone Container Corp. 465,500 6,691,562
Union Camp Corp. 151,600 7,219,950
- --------------------------------------------------------------------------
33,322,912
Petroleum and Petroleum Related: 9.1%
- --------------------------------------------------------------------------
Amoco Corp. 288,900 20,764,687
Atlantic Richfield Co. 92,900 10,288,675
Exxon Corp. 574,400 46,023,800
Halliburton Co. 277,800 14,063,625
Lyondell Petrochemical Co. 588,300 13,457,363
Mobil Corp. 123,200 13,798,400
Occidental Petroleum Corp. 195,000 4,168,125
Royal Dutch Petroleum Co. 147,600 20,830,050
Williams Companies Inc. 537,500 23,582,812
- --------------------------------------------------------------------------
166,977,537
Printing and Publishing: 0.5%
- --------------------------------------------------------------------------
New York Times Co. 321,800 9,533,325
- --------------------------------------------------------------------------
Public Utilities: 4.4%
- --------------------------------------------------------------------------
Baltimore Gas & Electric Co. 150,900 4,300,650
Consolidated Edison Co. 679,900 21,756,800
General Public Utilities Corp. 272,450 9,263,300
New York State Electric & Gas Corp.* 331,300 8,572,388
Northeast Utilities 388,000 9,457,500
SCE Corp. 203,700 3,615,675
Unicom Corp. 730,900 23,936,975
- --------------------------------------------------------------------------
80,903,288
Railroads: 0.2%
- --------------------------------------------------------------------------
Conrail Inc. 44,200 3,094,000
- --------------------------------------------------------------------------
Retail: 3.6%
- --------------------------------------------------------------------------
Eckerd Corp.* 115,300 5,145,263
Jostens Inc. 56,100 1,360,425
Kroger Co.* 611,600 22,935,000
Pier 1 Imports Inc. 416,700 4,739,962
Sears, Roebuck & Co. 228,200 8,899,800
Staples Inc.* 773,800 18,861,375
Waban Inc.* 252,500 4,734,375
- --------------------------------------------------------------------------
66,676,200
Securities Dealers: 1.5%
- --------------------------------------------------------------------------
Bear, Stearns & Co. Inc. 807,100 16,041,113
Dean Witter Discover & Co. 261,800 12,304,600
- --------------------------------------------------------------------------
28,345,713
Shoes: 0.7%
- --------------------------------------------------------------------------
Nike Inc. 178,600 $12,435,025
- --------------------------------------------------------------------------
Soaps, Cleaner and Cosmetics: 1.9%
- --------------------------------------------------------------------------
Clorox Co. 220,000 15,757,500
Colgate-Palmolive Co. 264,900 18,609,225
- --------------------------------------------------------------------------
34,366,725
Telecommunications: 9.2%
- --------------------------------------------------------------------------
American Telephone & Telegraph Co 345,200 22,351,700
Ameritech Corp. 607,500 35,842,500
Bellsouth Corp. 573,600 24,951,600
Comsat Corp. 281,600 5,244,800
GTE Corp. 738,000 32,472,000
Pacific Telesis Group 821,000 27,606,125
SBC Communications Inc. 135,800 7,808,500
Sprint Corp. 333,500 13,298,313
- --------------------------------------------------------------------------
169,575,538
Transportation: 0.9%
- --------------------------------------------------------------------------
Illinois Central Corp. 311,300 11,946,138
PHH Corp. 92,700 4,333,725
- --------------------------------------------------------------------------
16,279,863
Total Common Stocks: 97.0%
(Cost $1,404,390,388) 1,778,042,103
- --------------------------------------------------------------------------
Par
Money Market Instruments: Amount
----------
AT&T Corp.
5.65%, 1/17/96 $5,000,000 4,984,306
U.S. Treasury Bill
0.0%, 5/2/96 4,500,000 4,229,957
Avco Financial Services
5.66%, 2/13/96 2,500,000 2,464,232
Bell Atlantic Financial Services
5.77%, 1/17/96 7,600,000 7,556,148
Commercial Credit Co.
5.81%, 1/8/96 3,300,000 3,289,348
ITT-Hartford Group, Inc.
5.8%, 1/18/96 6,300,000 6,276,655
5.65%, 1/19/96 5,900,000 5,880,555
PHH Corp.
5.85%, 1/10/96 3,725,000 3,717,131
5.75%, 1/19/96 6,300,000 6,250,694
Smith Barney
5.8%, 1/3/96 4,200,000 4,185,790
5.9%, 1/3/96 5,600,000 5,593,521
Sony Captial Corp.
6.05%, 1/5/96 1,400,000 1,398,118
Sumitomo Corp. Of America
5.75%, 1/4/96 12,700,000 12,664,736
5.75%, 1/5/96 5,800,000 5,785,178
5.8%, 1/22/96 5,275,000 5,253,753
Temple-Inland Inc.
5.9%, 1/17/96 5,000,000 4,983,611
UBS Finance Inc.
5.75%, 1/2/96 6,800,000 6,786,967
- --------------------------------------------------------------------------
Total Money Market Instruments: 5.0%
(Cost $91,300,700) 91,300,700
- --------------------------------------------------------------------------
Total Investments: 102.0%
(Cost $1,495,691,088) 1,869,342,803
- --------------------------------------------------------------------------
Other Assets Under Liabilities (2.0%) (35,892,346)
- --------------------------------------------------------------------------
Net Assets: 100.0%
(equivalent to $29.756 per share
based on 61,615,296 shares
issued and outstanding) $1,833,450,457
==========================================================================
</TABLE>
<PAGE>
Lincoln National Managed Fund, Inc.
<TABLE>
<CAPTION>
<S> <C> <C>
Statement of Net Assets
December 31, 1995
Investments
Par Market
Long-Term Debt Investments: Amount Value
---------- ----------
U.S. Government and Agency Obligations: 21.2%
- --------------------------------------------------------------------------
FHLMC Pool
7.3%, 12/15/12 $2,994,978 $3,191,149
8.5%, 1/1/17 1,222,426 1,270,236
FNMA
7.56% Principal Strip, 12/20/01* 4,000,000 3,774,800
7.6%, 7/25/05 1,682,028 1,711,363
6.73%, 8/1/05 2,143,791 2,215,929
7.0%, 10/1/05 2,994,533 3,016,992
7.175%, 10/1/05 3,994,881 4,275,641
6.655%, 11/1/05 999,291 1,034,756
6.66%, 12/1/05 2,000,000 2,066,120
0.0% Debenture, 7/5/14* 2,500,000 770,700
7.15%, 10/1/15 2,989,283 3,032,209
7.5%, 5/25/20 4,000,000 4,123,880
GNMA
6.5%, 12/15/23 1,386,208 1,378,778
Tennessee Valley Authority Generic*
0.0%, 11/1/00 11,500,000 8,772,200
U.S. Treasury Bonds
8.0%, 11/15/21 6,500,000 8,135,140
U.S. Treasury Notes
7.875%, 11/15/04 6,000,000 6,948,720
6.5%, 8/15/05 7,200,000 7,672,464
7.375%, 5/15/96 2,000,000 2,015,620
8.875%, 2/15/96 7,000,000 7,030,590
6.0%, 6/30/96 13,000,000 13,048,750
5.375%, 5/31/98 5,000,000 5,015,600
U.S. Treasury Strip*
9.875%, 5/15/08 70,000,000 34,059,200
- --------------------------------------------------------------------------
124,560,837
Collateralized Mortgage Obligations: 0.7%
- --------------------------------------------------------------------------
FLHMC
8.0%, 4/15/16 2,075,507 2,121,687
Mid State Trust III
7.625%, 4/1/22 321,520 331,323
Prudential Home Mortgage
6.7%, 11/25/07 1,500,000 1,517,160
- --------------------------------------------------------------------------
3,970,170
Indexed Securities: 0.6%
- --------------------------------------------------------------------------
Caterpillar Financial Services Corp.*
4.25%, 1/8/96, coupon inversely
indexed to 2 year Italian swap
rate multiplied by 5.11. 3,500,000 3,476,900
- --------------------------------------------------------------------------
Air Transportation: 0.9%
- --------------------------------------------------------------------------
American Airlines Equipment Trust
10.18%, 1/2/13 1,500,000 1,881,855
Delta Air Lines Inc.
8.25%, 12/27/07 1,500,000 1,747,020
United Airline Inc. Equipment Trust
9.35%, 4/7/16 1,500,000 1,718,145
- --------------------------------------------------------------------------
5,347,020
Banking and Insurance: 4.2%
- --------------------------------------------------------------------------
Ahmanson HF & Co.
8.25%, 10/1/02 2,000,000 2,205,740
Banc One Corp.
9.875%, 3/1/09 500,000 647,965
Barclays Bank Services
3.875%, 11/30/49 2,000,000 1,715,000
Barnett Banks Inc. Note
6.9%, 9/1/05 1,500,000 1,563,705
Chase Manhattan Corp.
6.5% Subordinated Note, 1/15/09 3,000,000 3,003,750
First America Bank Corp.
7.75% Subordinated Note, 7/1/04 2,000,000 2,186,860
First Union Corp.
8.0%, 8/15/09 2,000,000 2,247,240
First USA Bank
5.75%, 1/15/99 2,000,000 1,989,920
Fleet Financial Group
7.25%, 9/1/99 1,000,000 1,046,880
National Westminster Bancorp
3.69%, 7/30/49 3,000,000 2,512,500
National Westminster Bank p.l.c.
9.45% Debentures, 5/1/01 500,000 577,820
NationsBank Corp.
8.125% Subordinated Debentures,6/15/02 1,000,000 1,103,600
Travelers Group Inc.
8.625%, 2/1/07 3,000,000 3,534,090
Viacom Inc.
8.75%, 5/15/01 500,000 511,250
- --------------------------------------------------------------------------
24,846,320
Entertainment: 0.4%
- --------------------------------------------------------------------------
Time Warner Inc.
8.875%, 10/1/12 500,000 559,330
9.125%, 1/15/13 1,500,000 1,687,710
- --------------------------------------------------------------------------
2,247,040
Finance: 3.8%
- --------------------------------------------------------------------------
Aristar Finance
7.5% Senior Subordinated Note, 7/1/99 1,500,000 1,579,170
Avco Financial Services Inc.
7.25%, 7/15/99 1,000,000 1,047,760
Chrysler Financial Corp.
9.5%, 12/15/99 1,500,000 1,684,935
Discover Credit Corp.
8.73% Med. Term Note, 8/15/96 500,000 509,805
Dow Capital B V
9.0%, 5/15/10 3,000,000 3,636,030
Ford Motor Credit Co.
7.95% Med. Term Notes, 5/17/99 2,000,000 2,131,580
General Electric Capital Corp.
8.3%, 9/20/09 3,000,000 3,613,050
General Motors Acceptance Corp.
7.85%, 11/15/97 1,500,000 1,558,650
8.875%, 6/1/10 1,500,000 1,826,670
Household Finance Corp.
9.625% Senior Subordinated Note, 7/15/00 875,000 999,749
International Lease Finance Co.
8.25%, 1/15/00 2,000,000 2,167,860
Salomon Inc.
7.25%, 1/15/00 1,000,000 1,022,350
Spiegel Charge Account Trust 2
6.95%, 12/17/01 500,000 510,265
- --------------------------------------------------------------------------
22,287,874
Financial Services: 0.4%
- --------------------------------------------------------------------------
B.A.T. Capital Corp. Euro Bd (UK)
6.5%, 11/24/03 2,500,000 2,514,063
- --------------------------------------------------------------------------
Food and Beverage: 0.7%
- --------------------------------------------------------------------------
Coca Cola Enterprises Inc.
8.0%, 1/4/05 3,000,000 3,419,310
Nabisco Inc.
7.55%, 6/15/15 750,000 786,090
- --------------------------------------------------------------------------
4,205,400
Foreign Government: 0.9%
- --------------------------------------------------------------------------
Hydro-Quebec
7.2%, Med. Term Note 10/5/09 3,000,000 3,475,560
Manitoba (Province of)
7.75%, 7/7/16 1,500,000 1,688,970
- --------------------------------------------------------------------------
5,164,530
Machinery and Engineering: 0.4%
- --------------------------------------------------------------------------
Deere & Co. Capital Corp.
8.625%, 8/1/19 2,000,000 2,401,440
- --------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Par Market
Amount Value
---------- ----------
<S> <C> <C>
Metals and Mining: 1.2%
- --------------------------------------------------------------------------------
Cyprus Amax Minerals Co. Note
7.375%, 5/15/07 $2,500,000 $2,670,325
Inco LTD Deb
9.6%, 6/15/22 1,300,000 1,499,810
Newmont Gold Co.
8.91%, 1/5/09 750,000 833,767
Noranda Inc.
8.125%, 6/15/04 2,000,000 2,220,380
- --------------------------------------------------------------------------------
7,224,282
Miscellaneous: 0.1%
- --------------------------------------------------------------------------------
Xerox Corp. - Euronote
8.375%, 9/25/96 500,000 505,745
- --------------------------------------------------------------------------------
Paper: 0.8%
- --------------------------------------------------------------------------------
Champion International Corp.
7.7%, 12/15/99 1,500,000 1,593,030
Westvaco Corp.
8.3%, 8/1/22 2,500,000 2,792,550
- --------------------------------------------------------------------------------
4,385,580
Petroleum and Petroleum Related: 0.9%
- --------------------------------------------------------------------------------
Enron Corp.
9.5%, 6/15/01 1,000,000 1,160,760
Noble Affiliates Inc.
7.25%, 10/15/23 600,000 611,418
Occidental Petroleum Corp.
11.75%, 3/15/11 2,000,000 2,113,360
Petro Canada - Debentures
8.6%, 10/15/01 1,500,000 1,670,895
- --------------------------------------------------------------------------------
5,556,433
Public Utilities: 5.6%
- --------------------------------------------------------------------------------
Baltimore Gas & Electric Co.
8.92% Med. Term Note, 7/16/98 1,000,000 1,073,820
Carolina Power & Light Co.
9.0%, 4/1/22 500,000 534,625
Central Maine Power Co.
6.5% Med. Term Note, 7/22/97 1,500,000 1,506,765
Commonwealth Edison Co.
9.375%, 2/15/00 500,000 557,020
Detroit Edison Co.
6.56% Med. Term Note, 5/1/01 2,000,000 2,042,980
Duquesne II Funding Corp.
8.7%, 6/1/16 2,475,000 2,773,089
Great Lakes Power Inc.
9.0%, 8/1/04 1,500,000 1,684,680
GTE Hawaiian Telephone Co. Inc. Sr Db
7.0%, 2/1/06 2,000,000 2,097,200
Gulf States Utilities Co.
7.35%, 11/1/98 1,500,000 1,553,205
Illinois Power Co.
5.85% 1st Mortgage Bonds, 10/1/96 625,000 625,363
Long Island Lighting Co.
9.625%, 7/1/24 500,000 529,995
National Rural Utilities Cooperative Finance Corp.
8.5%, 2/15/98 1,000,000 1,055,810
Nevada Power Co.
7.06%, 5/1/00 1,500,000 1,553,235
Old Dominion Electric Co-op
7.48%, 12/1/13 1,500,000 1,642,020
Pacificorp
9.15% Med. Term Note, 8/9/11 1,500,000 1,872,405
Pennsylvania Power & Light
7.7%, 10/1/09 3,000,000 3,378,990
Public Service Co. of Colorado
6.375%, 11/1/05 1,500,000 1,487,370
PSI Energy, Inc.
8.57% Med. Term Note, 12/27/11 500,000 579,570
Texas Gas Transmission Corp.
8.625%, 4/4/04 2,000,000 2,302,580
Texas Utilities Electric Co.
7.375%, 8/1/01 1,500,000 1,588,770
Utilicorp United Inc.
10.5%, 12/1/20 1,000,000 1,209,270
Washington Water Power Co.
8.01% Med. Term Note, 12/17/01 1,000,000 1,099,270
- --------------------------------------------------------------------------------
32,748,032
Railroads: 0.3%
- --------------------------------------------------------------------------------
Burlington Northern RR
6.94%, 1/2/14 500,000 524,930
Chicago & Northwestern Holdings Corp.
6.25%, 7/30/12 1,460,551 1,464,143
- --------------------------------------------------------------------------------
1,989,073
Retail: 0.5%
- --------------------------------------------------------------------------------
Sears, Roebuck & Co.
9.05%, 2/6/12 2,500,000 3,039,450
- --------------------------------------------------------------------------------
Securities Dealers: 0.7%
- --------------------------------------------------------------------------------
Lehman Brothers Holding Co. Sr Note
8.875%, 3/1/02 1,000,000 1,117,000
Smith Barney Holdings
7.875%, 10/1/99 3,000,000 3,196,170
- --------------------------------------------------------------------------------
4,313,170
Telecommunications: 0.6%
- --------------------------------------------------------------------------------
NYNEX Cap Funding
7.63% Med. Term Note, 10/15/09 3,000,000 3,465,450
- --------------------------------------------------------------------------------
Transportation: 0.4%
- --------------------------------------------------------------------------------
Federal Express Corp. Note
9.65%, 6/15/12 2,000,000 2,534,120
- --------------------------------------------------------------------------------
Total Long-Term Debt Investments: 45.3%
(Cost $253,283,367) 266,782,929
- --------------------------------------------------------------------------------
Number
Common Stocks: of Shares
----------
Aerospace: 1.0%
- --------------------------------------------------------------------------------
McDonnell Douglas Corp. 44,600 4,103,200
Parker Hannifin Corp. 51,550 1,765,588
- --------------------------------------------------------------------------------
5,868,788
Air Transportation: 0.4%
- --------------------------------------------------------------------------------
America West Airlines Inc. CL B* 24,700 419,900
AMR Corp.* 15,900 1,180,575
Continental Airlines Holdings Inc.* 11,400 495,900
Mesa Airlines Inc.* 52,500 472,500
- --------------------------------------------------------------------------------
2,568,875
Banking and Insurance: 5.5%
- --------------------------------------------------------------------------------
AllState Corp. 88,810 3,652,311
American Bankers Ins. Group Inc. 12,000 468,000
American General Corp. 97,900 3,414,263
Bank of Boston Corp. 78,200 3,616,750
Bank of New York Inc. 69,400 3,383,250
Banknorth Group Inc.* 13,200 508,200
Chemical Banking Corp. 63,100 3,707,125
Cigna Corp. 33,900 3,500,175
Deposit Guaranty Corp. 9,800 436,100
First Chicago NBD Corp. 96,835 3,824,983
HCC Insurance Holdings Inc.* 14,100 521,700
MAIC Holdings Inc.* 13,400 455,600
NationsBank Corp. 33,500 2,332,437
Onebancorp Inc. 15,100 503,962
Provident Bancorp* 10,500 493,500
Transamerica Corp. 17,500 1,275,313
Transport Holdings Inc.* 13 530
Travelers Group Inc. 2,700 169,762
United Carolina Bancshares Inc.* 11,900 401,625
- --------------------------------------------------------------------------------
32,665,586
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Number Market
of Shares Value
--------- ---------
<S> <C> <C>
Broadcasting: 0.5%
- ---------------------------------------------------------------
Heritage Media Corp.* 17,100 $438,187
King World Productions Inc.* 54,200 2,107,025
Renaissance Communication Corp.* 23,400 517,725
- ---------------------------------------------------------------
3,062,937
Building Materials: 0.2%
- ---------------------------------------------------------------
Dover Corp. 34,300 1,264,812
- ---------------------------------------------------------------
Building and Construction: 0.6%
- ---------------------------------------------------------------
Armstrong World Industries Inc. 24,900 1,543,800
Halliburton Co. 38,800 1,964,250
- ---------------------------------------------------------------
3,508,050
Chemicals: 1.8%
- ---------------------------------------------------------------
Albelmarle Corp.* 23,600 457,250
Bio Rad Laboratories Inc.* 11,000 467,500
Dow Chemical Co. 35,500 2,498,312
Du Pont E I De Nemours & Co. 20,900 1,460,388
Eastman Chemical Co. 20,400 1,277,550
International Specialty
Products* 44,400 482,850
Learonal Inc.* 16,800 386,400
Mississippi Chemical Corp.* 19,000 441,750
Olin Corp. 20,100 1,492,425
Somatogen Inc.* 22,300 420,912
Union Carbide Corp. 34,600 1,297,500
- ---------------------------------------------------------------
10,682,837
Coal and Gas: 0.2%
- ---------------------------------------------------------------
Louis Dreyfus Natural Gas Corp.* 31,900 482,488
New Jersey Resources Corp. 16,100 485,013
Zeigler Coal Holding Co. 38,200 530,025
- ---------------------------------------------------------------
1,497,526
Consumer Products and Services: 3.0%
- ---------------------------------------------------------------
American Brands Inc. 17,800 794,325
Black & Decker Corp. 26,300 927,075
Hughes Supply Inc.* 17,000 480,250
Libbey Inc. 20,000 450,000
Nash Finch Co. 22,700 414,275
Omnicom Group Inc. 18,000 670,500
Philip Morris Co. Inc. 89,000 8,054,500
Procter & Gamble Co. 69,400 5,760,200
- ---------------------------------------------------------------
17,551,125
Drug and Hospital Supplies: 4.4%
- ---------------------------------------------------------------
Adac Laboratories 36,300 440,138
Baxter International Inc. 101,800 4,262,875
Bristol Myers Squibb Co. 68,300 5,865,262
Lilly (Eli) & Co. 75,000 4,218,750
Merck & Co. Inc. 11,700 769,275
Omnicare Inc.* 12,000 537,000
Pharmacia & Upjohn Inc.* 106,045 4,109,244
Schering-Plough Corp. 76,400 4,182,900
Sybron International Corp.* 19,200 456,000
Target Therapeutics Inc.* 13,600 581,400
Watson Pharmaceuticals Inc.* 9,500 465,500
- ---------------------------------------------------------------
25,888,344
Electrical and Electronics: 4.1%
- ---------------------------------------------------------------
Alliance Semiconductor Corp.* 81,300 945,112
Applied Materials Inc.* 69,700 2,744,438
Arrow Electrics Inc.* 31,000 1,336,875
Auspex Systems Inc.* 29,600 540,200
Electroglas Inc.* 20,100 492,450
FSI International Inc.* 18,900 382,725
General Electric Co. 92,200 6,638,400
Harris Corp. 44,600 2,436,275
Helix Technology Corp.* 12,500 493,750
Kemet Corp. Class B* 19,100 456,013
Mentor Graphics Corp.* 101,100 1,845,075
Read Rite Corp.* 94,200 2,190,150
Rexel Inc.* 34,600 467,100
Sanmina Corp.* 8,800 456,500
Teradyne Inc.* 78,000 1,950,000
Texas Instruments Inc. 12,000 621,000
Wyle Electronics 11,500 403,937
- ---------------------------------------------------------------
24,400,000
Entertainment: 1.0%
- ---------------------------------------------------------------
Bally Entertainment Corp.* 61,500 861,000
Grand Casinos Inc.* 18,300 425,475
Mattel Inc. 33,512 1,030,494
Mirage Resorts Inc.* 96,800 3,339,600
- ---------------------------------------------------------------
5,656,569
Finance: 0.7%
- ---------------------------------------------------------------
Household International Inc. 58,000 3,429,250
One Valley Bancorp West
Virginia Inc. 14,000 437,500
- ---------------------------------------------------------------
3,866,750
Financial Services: 0.3%
- ---------------------------------------------------------------
Dean Witter Discover & Co. 21,800 1,024,600
Interpool, Inc. 27,300 487,988
Olympic Financial LTD* 28,800 468,000
- ---------------------------------------------------------------
1,980,588
Food and Beverage: 3.5%
- ---------------------------------------------------------------
Campbell Soup Co. 23,800 1,428,000
Coca Cola Co. 40,600 3,014,550
ConAgra Inc. 88,700 3,658,875
CPC International Inc. 23,000 1,578,375
Heinz H.J. Co. 71,250 2,360,156
Hudson Foods Inc. 28,000 483,000
IBP Inc. 53,800 2,716,900
RJR Nabisco Holding Corp. 38,480 1,188,070
Robert Mondavi Corp.* 14,000 386,750
Safeway Inc.* 52,400 2,698,600
Smithfield Foods Inc.* 14,400 457,200
WLR Foods Inc. 27,300 450,450
- ---------------------------------------------------------------
20,420,926
Hospital and Health Care: 0.3%
- ---------------------------------------------------------------
Healthcare Compare Corp.* 29,300 1,274,550
Universal Health Services Inc.* 11,000 488,125
- ---------------------------------------------------------------
1,762,675
Hotels: 0.1%
- ---------------------------------------------------------------
Marcus Corp.* 18,700 511,912
- ---------------------------------------------------------------
Industrial: 0.3%
- ---------------------------------------------------------------
TRW Inc. 20,800 1,612,000
- ---------------------------------------------------------------
Machinery and Engineering: 0.6%
- ---------------------------------------------------------------
Barnes Group Inc.* 12,000 432,000
Graco Inc. 13,600 414,800
Novellus Systems Inc.* 54,200 2,926,800
- ---------------------------------------------------------------
3,773,600
Metals and Mining: 1.1%
- ---------------------------------------------------------------
ASARCO Inc. 27,700 886,400
Chaparral Steel Co.* 30,100 504,175
Cyprus Amax Minerals Co. 15,600 407,550
Intermet Corp.* 38,000 399,000
Phelps Dodge Corp. 50,000 3,112,500
Texas Industries Inc.* 8,900 471,700
Tredegar Industries Inc. 14,400 468,000
- ---------------------------------------------------------------
6,249,325
Miscellaneous: 0.3%
- ---------------------------------------------------------------
Anthony Industries Inc. 19,700 453,100
CDW Computer Centers Inc.* 11,500 465,750
Medisense Inc.* 15,000 474,375
Ultratech Stepper Inc.* 17,100 440,325
- ---------------------------------------------------------------
1,833,550
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Number Market
of Shares Value
--------- ---------
<S> <C> <C>
Motor Vehicles and Equipment: 1.6%
- ----------------------------------------------------------------
Champion Enterprises Inc.* 17,000 $524,875
Custom Chrome Inc.* 19,100 441,688
Dana Corp. 33,500 979,875
Eaton Corp. 56,200 3,013,725
Ford Motor Co. 61,400 1,780,600
Goodrich BF Co. 26,500 1,805,313
Navistar International Corp.* 68,700 721,350
Wynns International Inc.* 15,100 447,337
- ----------------------------------------------------------------
9,714,763
Office and Business Equipment and Services: 4.0%
- ----------------------------------------------------------------
Adaptec Inc.* 27,300 1,119,300
Applied Magnetics Corp.* 28,800 536,400
Avery Dennison Corp. 32,700 1,639,088
Boole & Babbage Inc.* 17,700 433,650
Cadence Design Systems Inc.* 59,150 2,484,300
Cisco Systems Inc.* 23,900 1,783,537
Computer Associates
International Inc. 18,150 1,032,281
Computervision Corp.* 31,600 485,850
Dell Computer Corp.* 95,200 3,296,300
Gateway 2000 Inc.* 19,000 465,500
Health Management Systems Inc.* 12,600 491,400
Jack Henry & Associates* 19,900 492,525
Kronos Inc.* 10,300 489,250
Medic Computer Systems Inc.* 6,700 405,350
Micron Technology Inc. 20,800 824,200
Moore Corp. LTD 16,600 309,175
Optical Data Systems Inc.* 15,800 398,950
Reynolds & Reynolds Co. 21,800 847,475
Seagate Technology* 45,900 2,180,250
Sun Microsystems Inc.* 81,000 3,695,625
- ----------------------------------------------------------------
23,410,406
Paper: 0.6%
- ----------------------------------------------------------------
Bowater Inc. 35,000 1,242,500
Caraustar Industries Inc. 22,800 456,000
Republic Group* 34,900 488,600
Stone Container Corp. 85,400 1,227,625
- ----------------------------------------------------------------
3,414,725
Petroleum and Petroleum Related: 4.3%
- ----------------------------------------------------------------
Amoco Corp. 36,400 2,616,250
Atlantic Richfield Co. 13,600 1,506,200
Exxon Corp. 88,900 7,123,113
Lyondell Petrochemical Co. 123,600 2,827,350
Mitchell Energy & Development
Corp. 25,500 478,125
Mobil Corp. 41,500 4,648,000
Occidental Petroleum Corp. 38,200 816,525
Royal Dutch Petroleum Co. 19,000 2,681,375
Sonat Offshore Drilling Inc.* 11,000 492,250
Valero Energy Corp.* 17,500 428,750
Varco International Inc.* 38,700 464,400
Williams Companies Inc. 20,200 886,275
Yankee Energy System Inc. 18,800 474,700
- ----------------------------------------------------------------
25,443,313
Plastics: 0.2%
- ----------------------------------------------------------------
LCI International Inc.* 26,000 533,000
Safeskin Corp.* 26,800 455,600
- ----------------------------------------------------------------
988,600
Printing and Publishing: 0.5%
- ----------------------------------------------------------------
American Business Products Inc.* 19,300 550,050
Bowne & Co. Inc. 22,900 458,000
New York Times Co. 36,300 1,075,387
Pulitzer Publishing Co.* 9,800 467,950
Scientific Games Holdings Corp.* 13,300 502,075
- ----------------------------------------------------------------
3,053,462
Public Utilities: 2.4%
- ----------------------------------------------------------------
Consolidated Edison Co. 102,800 3,289,600
General Public Utilities Corp. 40,200 1,366,800
Green Mountain Power Corp. 16,300 452,325
Northeast Utilities 93,600 2,281,500
Northwestern Public Service Co.* 16,800 470,400
Ohio Edison Co. 24,200 568,700
SCE Corp. 142,100 2,522,275
Southern California Water Co.* 23,500 475,875
TNP Enterprises Inc. 23,900 448,125
Tucson Electric Power Co.* 150,000 487,500
Unicom Corp. 51,100 1,673,525
- ----------------------------------------------------------------
14,036,625
Railroads: 0.1%
- ----------------------------------------------------------------
Conrail Inc. 8,600 602,000
- ----------------------------------------------------------------
Restaurant: 0.1%
- ----------------------------------------------------------------
Applebee's International Inc. 18,100 411,775
- ----------------------------------------------------------------
Retail: 2.8%
- ----------------------------------------------------------------
Carson Pirie Scott & Co.* 22,600 449,175
Caseys General Stores Inc.* 23,200 507,500
Claire's Stores Inc. 21,000 370,125
CompUSA Inc.* 15,500 482,438
Eckerd Corp.* 21,900 977,288
Fabri Centers Of America* 32,000 424,000
Jostens Inc. 129,500 3,140,375
Kroger Co.* 85,200 3,195,000
National Media Corp.* 25,000 525,000
Pier 1 Imports Inc. 60,000 682,500
Sears, Roebuck & Co. 52,900 2,063,100
Staples Inc.* 104,700 2,552,062
Waban Inc.* 51,200 960,000
Zale Corp.* 27,000 435,375
- ----------------------------------------------------------------
16,763,938
Securities Dealers: 0.4%
- ----------------------------------------------------------------
Bear, Stearns & Co. Inc. 89,700 1,782,788
Raymond James Financial Inc. 19,800 418,275
- ----------------------------------------------------------------
2,201,063
Shoes: 0.5%
- ----------------------------------------------------------------
Nike Inc. 43,800 3,049,574
- ----------------------------------------------------------------
Soaps, Cleaner and Cosmetics: 0.7%
- ----------------------------------------------------------------
Clorox Co. 12,500 895,313
Colgate-Palmolive Co. 43,500 3,055,875
- ----------------------------------------------------------------
3,951,188
Telecommunications: 4.2%
- ----------------------------------------------------------------
American Telephone & Telegraph Co. 56,100 3,632,475
Ameritech Corp. 89,800 5,298,200
Bellsouth Corp. 90,600 3,941,100
Cincinnati Bell Inc. 54,500 1,893,874
Comnet Cellular Inc.* 16,500 476,438
GTE Corp. 73,300 3,225,200
Pacific Telesis Group 119,600 4,021,550
Sprint Corp. 64,700 2,579,913
- ----------------------------------------------------------------
25,068,750
Textiles-Apparel Manufacturing: 0.1%
- ----------------------------------------------------------------
Pillowtex Corp.* 37,900 440,587
- ----------------------------------------------------------------
Transportation: 0.6%
- ----------------------------------------------------------------
Illinois Central Corp. 65,700 2,521,238
PHH Corp. 21,300 995,775
- ----------------------------------------------------------------
3,517,013
Waste Management: 0.1%
- ----------------------------------------------------------------
United Waste Systems Inc.* 11,200 417,199
- ----------------------------------------------------------------
Total Common Stocks: 53.1%
(Cost $250,080,875) 313,111,756
- ----------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Par Market
Amount Value
---------- ----------
<S> <C> <C>
Money Market Instruments:
ITT-Hartford Group Inc.
5.8%, 1/15/96 $9,700,000 $9,684,372
UBS Finance Inc.
5.75%, 1/2/96 9,000,000 8,982,750
6.0%, 1/2/96 8,400,000 8,390,200
- ------------------------------------------------------------------------
Total Money Market Instruments: 4.6%
(Cost $27,057,322) 27,057,322
- ------------------------------------------------------------------------
Total Investments: 103.0%
(Cost $530,421,564) 606,952,007
- ------------------------------------------------------------------------
Other Assets Under Liabilities: (3.0%) (17,787,406)
- ------------------------------------------------------------------------
Net Assets: 100.0%
(equivalent to $15.895 per share
based on 37,066,794 shares
issued and outstanding) $589,164,601
========================================================================
Lincoln National Money Market
Fund, Inc.
Statement of Net Assets
December 31, 1995
Investments
Par Market
Money Market Instruments: Amount Value
---------- ----------
U.S. Government and Agency Obligations: 19.4%
- ------------------------------------------------------------------------
Federal Home Loan Bank
5.61%, 9/20/96 $7,000,000 $6,994,171
Federal Home Loan Mortgage Corp.
7.699%, 12/15/96 1,500,000 1,530,465
FNMA
7.07%, 11/18/96 1,400,000 1,418,489
U.S. Treasury Bill
6.61%, 2/8/96 5,000,000 4,665,828
- ------------------------------------------------------------------------
14,608,953
Banking and Insurance: 21.2%
- ------------------------------------------------------------------------
Boatmen's Bank of Southern Missouri
6.25%, 2/14/96 4,100,000 4,099,912
Corporate Asset Funding Co.
5.53%, 2/22/96 1,200,000 1,188,387
First Bank of South Dakota Floater
5.91% Med. Term Note, 5/6/96 4,000,000 3,999,727
Metlife Funding Inc.
5.67%, 2/2/96 3,000,000 2,972,122
Morgan Guaranty Trust Co. of NY
6.0%, 10/11/96 3,700,000 3,700,000
- ------------------------------------------------------------------------
15,960,148
Chemicals: 4.1%
- ------------------------------------------------------------------------
Du Pont E I De Nemours & Co.
5.673%, 1/25/96 3,100,000 3,062,893
- ------------------------------------------------------------------------
Consumer Products and Services: 1.5%
- ------------------------------------------------------------------------
Kimberly Clark Corp.
5.6%, 1/30/96 1,100,000 1,094,524
- ------------------------------------------------------------------------
Finance: 19.3%
- ------------------------------------------------------------------------
American Express Centurian Bank
5.72%, 10/29/96 3,800,000 3,799,417
Associates Corp. of North America
5.853%, 1/2/96 3,100,000 3,100,000
Avco Financial Services Inc.
5.66%, 2/13/96 3,700,000 3,647,063
Caterpillar Financial Services Corp.
6.12% Med. Term Note, 7/25/96 4,000,000 4,000,000
- ------------------------------------------------------------------------
14,546,480
Machinery and Engineering: 4.5%
- ------------------------------------------------------------------------
Vermont American Corp.
5.65%, 2/02/96 3,435,000 3,411,819
- ------------------------------------------------------------------------
Motor Vehicles and Equipment: 8.6%
- ------------------------------------------------------------------------
Daimler-Benz North America Corp.
5.7%, 2/2/96 3,500,000 3,465,088
Toyota Motor Credit Floater
6.08%, 1/12/96 3,000,000 3,000,000
- ------------------------------------------------------------------------
6,465,088
Petroleum and Petroleum Related: 1.7%
- ------------------------------------------------------------------------
Exxon Imperial U.S. Inc.
5.7%, 1/12/96 1,300,000 1,290,943
- ------------------------------------------------------------------------
Securities Dealers: 14.4%
- ------------------------------------------------------------------------
Dean Witter Discover & Co.
5.7%, 2/7/96 3,500,000 3,463,979
Merrill Lynch & Co. Inc.
5.8%, 1/11/96 3,700,000 3,679,136
Smith Barney Holdings
5.76%, 1/9/96 3,700,000 3,680,464
- ------------------------------------------------------------------------
10,823,579
Telecommunications: 4.9%
- ------------------------------------------------------------------------
Southwestern Bell Capital Corp.
5.64%, 3/25/96 3,800,000 3,710,700
- ------------------------------------------------------------------------
Transportation: 5.3%
- ------------------------------------------------------------------------
PHH Corp. Floater
5.901% Med. Term Note, 8/21/96 4,000,000 3,998,996
- ------------------------------------------------------------------------
Total Money Market Instruments: 104.9%
(Cost $78,974,123) 78,974,123
- ------------------------------------------------------------------------
Other Assets Under Liabilities: (4.9%) (3,654,736)
- ------------------------------------------------------------------------
Net Assets: 100.0%
(equivalent to $10.000 per share
based on 7,531,939 shares
issued and outstanding) $75,319,387
========================================================================
Lincoln National Special Opportunities
Fund, Inc.
Statement of Net Assets
December 31, 1995
Investments
Number Market
Common Stocks: of Shares Value
--------- ----------
Aerospace: 1.0%
- ------------------------------------------------------------------------
McDonnell Douglas Corp. 53,400 $4,912,800
- ------------------------------------------------------------------------
Banking and Insurance: 10.9%
- ------------------------------------------------------------------------
Bank of Boston Corp. 110,000 5,087,500
Bank of New York Inc. 109,500 5,338,125
Chemical Banking Corp. 84,500 4,964,375
Cigna Corp. 47,100 4,863,075
First Chicago NBD Corp. 121,994 4,818,763
Mid Ocean LTD Shares 138,600 5,145,525
NationsBank Corp. 71,100 4,950,338
Star Banc Corp. 80,000 4,760,000
Transamerica Corp. 70,400 5,130,400
Travelers Inc. 80,800 5,080,300
US Life Corp. 166,950 4,987,631
- ------------------------------------------------------------------------
55,126,032
Building Materials: 1.0%
- ------------------------------------------------------------------------
Dover Corp. 135,700 5,003,938
- ------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Number Market
of Shares Value
------------ ---------
<S> <C> <C>
Chemicals: 2.9%
- ----------------------------------------------------------------
Eastman Chemical Co. 74,800 $4,684,350
Olin Corp. 69,700 5,175,225
Union Carbide Corp. 129,500 4,856,250
- ----------------------------------------------------------------
14,715,825
Consumer Products and Services: 3.9%
- ----------------------------------------------------------------
American Brands Inc. 111,900 4,993,538
Leggett & Platt Inc. 210,900 5,114,325
The Stanley Works 89,900 4,629,850
Universal Corp. 207,700 5,062,687
- ----------------------------------------------------------------
19,800,400
Drug and Hospital Supplies: 4.0%
- ----------------------------------------------------------------
Baxter International Inc. 118,000 4,941,250
Medtronic Inc. 87,800 4,905,825
Nellcor Inc.* 87,800 5,092,400
Pharmacia & Upjohn Inc.* 136,590 5,292,863
- ----------------------------------------------------------------
20,232,338
Electrical and Electronics: 7.5%
- ----------------------------------------------------------------
Alliance Semiconductor Corp.* 256,600 2,982,975
Applied Materials Inc.* 116,800 4,599,000
Cirrus Logic Inc.* 111,500 2,202,125
Cypress Semiconductor Corp.* 362,100 4,616,775
Harris Corp. 92,900 5,074,663
Lam Research Corp.* 108,000 4,941,000
Teradyne Inc.* 206,100 5,152,500
Texas Instruments Inc. 77,200 3,995,100
TRW Inc. 57,700 4,471,750
- ----------------------------------------------------------------
38,035,888
Entertainment: 2.1%
- ----------------------------------------------------------------
Mattel Inc. 176,843 5,437,922
Mirage Resorts Inc.* 151,300 5,219,850
- ----------------------------------------------------------------
10,657,772
Finance: 0.9%
- ----------------------------------------------------------------
Household International Inc. 78,500 4,641,312
- ----------------------------------------------------------------
Food and Beverage: 3.7%
- ----------------------------------------------------------------
Heinz H.J. Co. 156,300 5,177,438
IBP Inc. 79,400 4,009,700
International Multifoods Corp. 220,700 4,441,587
Von Companies Inc.* 183,700 5,189,525
- ----------------------------------------------------------------
18,818,250
Industrial: 0.7%
- ----------------------------------------------------------------
Measurex Corp. 111,100 3,138,575
Trinova Corp. 8,500 243,313
- ----------------------------------------------------------------
3,381,888
Machinery and Engineering: 2.0%
- ----------------------------------------------------------------
Carpenter Technology Corp. 123,000 5,058,375
Novellus Systems Inc.* 90,300 4,876,200
- ----------------------------------------------------------------
9,934,575
Metals and Mining: 4.5%
- ----------------------------------------------------------------
ASARCO Inc. 157,100 5,027,200
Ball Corp. 130,500 3,588,750
Cleveland-Cliffs Inc. 118,700 4,866,700
Parker Hannifin Corp. 140,150 4,800,138
Phelps Dodge Corp. 75,400 4,693,650
- ----------------------------------------------------------------
22,976,438
Miscellaneous: 1.0%
- ----------------------------------------------------------------
Flight Transportation Corp.* 4,725 1
Snap On Inc. 110,900 5,018,225
- ----------------------------------------------------------------
5,018,226
Motor Vehicles and Equipment: 1.9%
- ----------------------------------------------------------------
Dana Corp. 168,000 4,914,000
Eaton Corp. 86,500 4,638,563
- ----------------------------------------------------------------
9,552,563
Office and Business Equipment and Services: 8.8%
- ----------------------------------------------------------------
Borland International Inc.* 271,300 $4,476,450
Cadence Design Systems Inc.* 128,850 5,411,700
Mentor Graphics Corp.* 270,600 4,938,450
Moore Corp. LTD 255,200 4,753,100
New England Business
Services Inc. 223,600 4,863,300
Reynolds & Reynolds Co. 133,100 5,174,263
Seagate Technology* 105,700 5,020,750
Sun Microsystems Inc.* 112,100 5,114,562
Symantec Corp.* 193,700 4,503,525
- ----------------------------------------------------------------
44,256,100
Paper: 4.1%
- ----------------------------------------------------------------
Avery Dennison Corp. 104,900 5,258,112
Boise Cascade Corp. 129,500 4,483,937
Chesapeake Corp. 127,900 3,789,038
Stone Container Corp. 216,500 3,112,187
Westvaco Corp. 152,850 4,241,587
- ----------------------------------------------------------------
20,884,861
Petroleum and Petroleum Related: 6.7%
- ----------------------------------------------------------------
GATX 95,700 4,653,412
Lyondell Petrochemical Co. 215,000 4,918,125
Occidental Petroleum Corp. 239,000 5,108,625
Phillips Petroleum Co. 139,900 4,774,087
Smith International Inc.* 212,100 4,984,350
Union Texas Petroleum 236,900 4,589,938
Williams Companies Inc. 115,000 5,045,625
- ----------------------------------------------------------------
34,074,162
Printing and Publishing: 1.9%
- ----------------------------------------------------------------
Banta Corp. 112,500 4,950,000
New York Times Co. 165,300 4,897,013
- ----------------------------------------------------------------
9,847,013
Public Utilities: 7.6%
- ----------------------------------------------------------------
Baltimore Gas & Electric Co. 170,700 4,864,950
General Public Utilities Corp. 153,200 5,208,800
Northeast Utilities 195,900 4,775,062
Rochester Gas & Electric Corp. 198,000 4,479,750
SCE Corp. 260,400 4,622,100
Sierra Pacific Resources* 209,600 4,899,400
Southwestern Public Service Co.* 145,800 4,774,950
Unicom Corp. 149,300 4,889,575
- ----------------------------------------------------------------
38,514,587
Railroads: 2.0%
- ----------------------------------------------------------------
Burlington Northern Inc. 58,100 4,531,800
Burlington Northern Santa Fe 7,000 546,000
Conrail Inc. 68,700 4,809,000
- ----------------------------------------------------------------
9,886,800
Restraurant: 0.9%
- ----------------------------------------------------------------
Buffets Inc.* 330,100 4,538,875
- ----------------------------------------------------------------
Retail: 7.1%
- ----------------------------------------------------------------
Eckerd Corp.* 114,200 5,096,175
Kroger Co.* 138,500 5,193,750
Rite Aid Corp. 158,100 5,414,925
Smith's Food & Drug Centers Inc. 193,400 4,883,350
Staples Inc.* 224,450 5,470,969
Tiffany & Co. 95,600 4,815,850
Waban Inc.* 267,900 5,023,125
- ----------------------------------------------------------------
35,898,144
Securities Dealers: 1.9%
- ----------------------------------------------------------------
Bear, Stearns & Co. Inc. 238,400 4,738,200
Edwards (A G) Inc.* 200,000 4,775,000
- ----------------------------------------------------------------
9,513,200
Shoes: 1.1%
- ----------------------------------------------------------------
Nike Inc. 78,700 5,479,487
- ----------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Number Market
of Shares Value
--------- ----------
<S> <C> <C>
Soaps, Cleaner and Cosmetics: 1.8%
- -----------------------------------------------------------------------
Clorox Co. 66,300 $4,748,738
International Flavors & Fragrances Inc. 94,000 4,512,000
- -----------------------------------------------------------------------
9,260,738
Steel: 0.6%
- -----------------------------------------------------------------------
USX Steel Group Inc. 105,300 3,237,975
- -----------------------------------------------------------------------
Telecommunications: 1.0%
- -----------------------------------------------------------------------
Pacific Telesis Group 143,100 4,811,737
- -----------------------------------------------------------------------
Textiles-Apparel Manufacturing: 0.9%
- -----------------------------------------------------------------------
Springs Industries Inc. 108,700 4,497,462
- -----------------------------------------------------------------------
Total Common Stocks: 94.4%
(Cost $410,931,424) 477,509,386
- -----------------------------------------------------------------------
Par
Money Market Instruments: Amount
----------
ITT-Hartford Group Inc.
5.8%, 1/8/96 $9,600,000 9,584,534
Sumitomo Corp. Of America
6.0%, 1/5/96 18,100,000 18,072,850
UBS Finance Inc.
5.75%, 2/1/96 6,200,000 6,188,117
6.0%, 2/1/96 1,400,000 1,398,366
United States Treasury Bill
0.0%, 5/1/96+ 750,000 704,993
- -----------------------------------------------------------------------
Total Money Market Instruments: 7.1%
(Cost $35,948,860) 35,948,860
- -----------------------------------------------------------------------
Total Investments: 101.5%
(Cost $446,880,284) 513,458,246
- -----------------------------------------------------------------------
Other Assets Under Liabilities: (1.5%) (7,703,566)
- -----------------------------------------------------------------------
Net Assets: 100.0%
(equivalent to $27.383 per share
based on 18,469,661 shares
issued and outstanding) $505,754,680
=======================================================================
</TABLE>
* Non-income producing.
+ Pledged as collateral for financial futures contracts.
See accompanying notes to financial statements.
<PAGE>
STATEMENT OF OPERATIONS
Year Ended December 31, 1995
<TABLE>
<CAPTION>
Lincoln Lincoln Lincoln
Lincoln National Lincoln National National
National Growth National Money Special
Bond and Income Managed Market Opportunities
Fund, Inc. Fund, Inc. Fund, Inc. Fund, Inc. Fund, Inc.
-----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Investment income:
Interest $16,669,644 $5,126,223 $17,168,999 $4,972,995 $1,659,405
- ---------------------------------------------------------------------------------------------------------------
Dividends - 39,790,594 7,482,245 - 10,372,607
- ---------------------------------------------------------------------------------------------------------------
Total investment income 16,669,644 44,916,817 24,651,244 4,972,995 12,032,012
- ---------------------------------------------------------------------------------------------------------------
Expenses:
Management fees 1,061,701 5,077,981 2,120,656 385,019 1,809,514
- ---------------------------------------------------------------------------------------------------------------
Directors fees 3,000 3,000 3,000 3,000 3,000
- ---------------------------------------------------------------------------------------------------------------
Printing and Postage 7,462 14,924 11,193 7,462 29,849
- ---------------------------------------------------------------------------------------------------------------
Other 42,709 189,603 80,925 25,165 59,359
- ---------------------------------------------------------------------------------------------------------------
Total expenses 1,114,872 5,285,508 2,215,774 420,646 1,901,722
- ---------------------------------------------------------------------------------------------------------------
Net investment income 15,554,772 39,631,309 22,435,470 4,552,349 10,130,290
- ---------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss)
on investments:
Net realized gain (loss) on:
Investment transactions 5,612,959 112,217,388 37,948,391 - 40,236,411
- ---------------------------------------------------------------------------------------------------------------
Options written - - - - (2,078,011)
- ---------------------------------------------------------------------------------------------------------------
Net realized gain on
investments 5,612,959 112,217,388 37,948,391 - 38,158,400
- ---------------------------------------------------------------------------------------------------------------
Net change in unrealized
appreciation or depreciation on:
Investments 19,675,624 328,786,475 74,805,363 - 62,954,572
- ---------------------------------------------------------------------------------------------------------------
Options written - - - - 20,675
- ---------------------------------------------------------------------------------------------------------------
Net change in unrealized
appreciation or depreciation
on investments 19,675,624 328,786,475 74,805,363 - 62,975,247
- ---------------------------------------------------------------------------------------------------------------
Net gain on investments 25,288,583 441,003,863 112,753,754 - 101,133,647
- ---------------------------------------------------------------------------------------------------------------
Net increase in net assets
resulting from operations $40,843,355 $480,635,172 $135,189,224 $4,552,349 $111,263,937
===============================================================================================================
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS
Years Ended December 31, 1994 and 1995
Lincoln Lincoln Lincoln
Lincoln National Lincoln National National
National Growth National Money Special
Bond and Income Managed Market Opportunities
Fund, Inc. Fund, Inc. Fund, Inc. Fund, Inc. Fund, Inc.
----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Assets at January 1, 1994 $226,149,503 $1,034,105,477 $445,039,996 $81,041,767 $273,997,784
- ------------------------------------------------------------------------------------------------------------------------------------
Changes from operations:
Net investment income 13,491,950 31,708,118 20,179,660 3,196,613 7,440,312
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized gain (loss) on investments (9,964,996) 69,061,295 718,100 - 15,004,876
- ------------------------------------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation
or depreciation on investments (13,242,315) (86,360,222) (29,823,356) - (25,542,877)
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
resulting from operations (9,715,361) 14,409,191 (8,925,596) 3,196,613 (3,097,689)
- ------------------------------------------------------------------------------------------------------------------------------------
Dividends to shareholder from:
Net investment income (13,491,950) (31,708,118) (20,179,660) (3,196,613) (7,440,312)
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized gain on investments (9,456,561) (45,931,842) (17,841,259) - (18,072,011)
- ------------------------------------------------------------------------------------------------------------------------------------
Total dividends to shareholder (22,948,511) (77,639,960) (38,020,919) (3,196,613) (25,512,323)
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
resulting from capital share transactions 1,524,135 190,449,599 44,046,103 (3,864,330) 73,029,402
- ------------------------------------------------------------------------------------------------------------------------------------
Total increase (decrease) in net assets (31,139,737) 127,218,830 (2,900,412) (3,864,330) 44,419,390
- ------------------------------------------------------------------------------------------------------------------------------------
Net Assets at December 31, 1994 $195,009,766 $1,161,324,307 $442,139,584 $77,177,437 $318,417,174
Changes from operations:
Net investment income 15,554,772 39,631,309 22,435,470 4,552,349 10,130,290
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized gain on investments 5,612,959 112,217,388 37,948,391 - 38,158,400
- ------------------------------------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation
or depreciation on investments 19,675,624 328,786,475 74,805,363 - 62,975,247
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets
resulting from operations 40,843,355 480,635,172 135,189,224 4,552,349 111,263,937
- ------------------------------------------------------------------------------------------------------------------------------------
Dividends to shareholder from:
Net investment income (15,554,772) (39,631,309) (22,435,470) (4,552,349) (10,130,290)
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized gain on investments - (69,061,295) (718,100) - (15,004,876)
- ------------------------------------------------------------------------------------------------------------------------------------
Total dividends to shareholder (15,554,772) (108,692,604) (23,153,570) (4,552,349) (25,135,166)
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
resulting from capital share transactions 30,517,705 300,183,582 34,989,363 (1,858,050) 101,208,735
- ------------------------------------------------------------------------------------------------------------------------------------
Total increase (decrease) in net assets 55,806,288 672,126,150 147,025,017 (1,858,050) 187,337,506
- ------------------------------------------------------------------------------------------------------------------------------------
Net Assets at December 31, 1995 $250,816,054 $1,833,450,457 $589,164,601 $75,319,387 $505,754,680
====================================================================================================================================
See accompanying notes to financial statements.
</TABLE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS
December 31, 1995
1. SIGNIFICANT ACCOUNTING POLICIES
THE FUNDS: Lincoln National Bond Fund, Inc., Lincoln National Growth and Income
Fund, Inc., Lincoln National Managed Fund, Inc., and Lincoln National Money
Market Fund, Inc., are registered as open-end, diversified management investment
companies and Lincoln National Special Opportunities Fund, Inc. is registered
as an open-end, non-diversified management investment company under the
Investment Company Act of 1940, as amended. The Funds' shares are sold only to
The Lincoln National Life Insurance Company (the Company) for allocation to its
Variable Annuity Account C, which was established for the purpose of funding
variable annuity contracts, and to its Flexible Premium Variable Life Accounts
D, G, and K, which were established for the purpose of funding variable
universal life contracts.
The Funds' investment objectives are as follows:
<TABLE>
<CAPTION>
FUND INVESTMENT OBJECTIVE
---- --------------------
<S> <C>
Lincoln National Bond Fund, Inc. The investment objective is to maximize current income consistent with
prudent investment strategy. The Fund invests primarily in medium and long-
term corporate and government bonds.
Lincoln National Growth and Income Fund, Inc. The investment objective is to maximize long-term capital appreciation. The
Fund buys stocks of established companies.
Lincoln National Managed Fund, Inc. The investment objective is to maximize long-term total return (capital gains
plus income) consistent with prudent investment strategy. The Fund invests in
a mix of stocks, bonds, and money market securities, as determined by an
investment committee.
Lincoln National Money Market Fund, Inc. The investment objective is to maximize current income consistent with the
preservation of capital. The Fund invests in short-term obligations issued by
U.S. corporations, the U.S. Government, and federally-chartered banks and
U.S. branches of foreign banks.
Lincoln National Special Opportunities Fund, Inc. The investment objective is to maximize capital appreciation. The Fund
primarily invests in mid-size companies whose stocks have significant growth
potential. Current income is a secondary consideration.
</TABLE>
INVESTMENT VALUATION: Investments are stated at value. Portfolio securities
which are traded on stock exchanges are valued at the last reported sale price
on the exchange or market where primarily traded or listed or, in the absence of
recent sales, at the mean between the last reported bid and asked prices. Long-
term debt investments are valued at their bid quotations. The Funds hedge
certain portions of their exposure to fluctuations in interest and market risks
by entering into derivative transactions. These hedges include options and
financial futures. Options traded on exchanges are valued at the last bid
price for options purchased and the last sale price for options written. Options
traded in the over-the-counter market are valued at the last bid price for
options purchased and the last asked price for options written. Financial
futures are valued at the settlement price established each day by the board of
trade or exchange on which they are traded. Other securities and assets for
which market quotations are not readily available are valued at fair value as
determined in good faith by or under the direction of the Funds' Board of
Directors. Money market instruments in securities are stated at amortized cost,
which approximates market value.
INVESTMENT TRANSACTIONS AND INVESTMENT INCOME: Investment transactions are
accounted for on the trade date. Dividend income is recorded on the ex-dividend
date and interest income is recorded on the accrual basis. Interest income
includes premium and discount amortization on money market instruments and
mortgage-backed securities; it also includes original issue and market discount
amortization on long-term debt investments. Realized gains or losses from
investment transactions are reported on an identified cost basis. Gains and
losses on premiums from expired options are recognized on the date of
expiration.
EXPENSES: The custodian bank of the Lincoln National Bond Fund, Inc., Lincoln
National Growth and Income Fund, Inc., Lincoln National Managed Fund, Inc.,
Lincoln National Money Market Fund, Inc., and Lincoln National Special
Opportunities Fund, Inc. has agreed to waive its custodial fees when the Funds
maintain a prescribed amount of cash on deposit in certain non-interest bearing
accounts. For the year ended December 31, 1995, the custodial fees offset
arrangements were not material to either total expenses or the calculation of
average net assets and the ratio of expenses to average net assets.
<PAGE>
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
TAXES: Each Fund has complied with the special provisions of the Internal
Revenue Code for regulated investment companies. As such, each Fund is not
subject to U.S. federal income taxes to the extent that it distributes all of
its taxable income for its fiscal year.
2. OTHER ASSETS UNDER LIABILITIES
The statement of net assets accounts "Other Assets Under Liabilities" at
December 31, 1995 consisted of the following assets (liabilities):
<TABLE>
<CAPTION>
LINCOLN LINCOLN LINCOLN
LINCOLN NATIONAL LINCOLN NATIONAL NATIONAL
NATIONAL GROWTH NATIONAL MONEY SPECIAL
BOND AND INCOME MANAGED MARKET OPPORTUNITIES
FUND, INC. FUND, INC. FUND, INC. FUND, INC. FUND, INC
------------- ------------- ------------- ------------ --------------
<S> <C> <C> <C> <C> <C>
Cash $ 339,473 $ 830,757 $ 1,258,934 $ 146,890 $ 1,203,486
- -----------------------------------------------------------------------------------------------------------
Receivable for dividends earned - 4,440,444 749,005 - 1,190,953
- -----------------------------------------------------------------------------------------------------------
Receivable for interest earned 3,436,206 358,793 3,855,207 789,708 61,939
- -----------------------------------------------------------------------------------------------------------
Receivable for securities sold - - 106,557 - 3,791,213
- -----------------------------------------------------------------------------------------------------------
Dividends declared and unpaid (15,554,772) (39,631,309) (22,435,470) (4,552,349) (10,130,290)
- -----------------------------------------------------------------------------------------------------------
Payable for securities Purchased - (1,368,346) (1,115,977) - (3,338,623)
- -----------------------------------------------------------------------------------------------------------
Management fees payable (97,784) (511,243) (196,393) (30,721) (175,592)
- -----------------------------------------------------------------------------------------------------------
Other, net (8,439) (11,442) (9,269) (8,264) (306,652)
- -----------------------------------------------------------------------------------------------------------
$(11,885,316) $(35,892,346) $(17,787,406) $(3,654,736) $ (7,703,566)
========================================================================
</TABLE>
3. MANAGEMENT FEES AND OTHER TRANSACTIONS WITH AFFILIATES
Lincoln Investment Management, Inc. (the Advisor) manages the Funds' investment
portfolios, maintains their accounts and records, and furnishes the services of
individuals to perform executive and administrative functions of the Funds. In
return for these services, the Advisor receives a management fee at an annual
rate of .48% of the first $200,000,000 of the average daily net asset value of
the Funds, .40% of the next $200,000,000, and .30% of the average daily net
asset value of the Funds in excess of $400,000,000. If the aggregate annual
expenses of the Funds, including the management fee, but excluding taxes,
interest, brokerage commissions relating to the purchase or sale of portfolio
securities and extraordinary non-recurring expenses, exceeds 1 1/2% of the
average daily net asset value of the Fund, the Advisor will reimburse the Funds
in the amount of such excess. No reimbursement was due for the year ended
December 31, 1995.
Certain officers and directors of the Funds are also officers or directors of
the Company. The compensation of unaffiliated directors of the Funds is borne
by the Funds.
4. ANALYSIS OF NET ASSETS
The analysis of net assets at December 31, 1995 consisted of the following:
<TABLE>
<CAPTION>
LINCOLN LINCOLN LINCOLN
LINCOLN NATIONAL LINCOLN NATIONAL NATIONAL
NATIONAL GROWTH NATIONAL MONEY SPECIAL
BOND AND INCOME MANAGED MARKET OPPORTUNITIES
FUND, INC. FUND, INC. FUND, INC. FUND, INC. FUND, INC.
------------- -------------- ------------ ----------- -------------
<S> <C> <C> <C> <C> <C>
Common Stock, par value
$.01 per share ** $ 204,803 $ 616,153 $ 370,668 $ 75,319 $ 184,697
- ----------------------------------------------------------------------------------------------------------------------
Paid-in capital in excess of par
value of shares issued 241,848,769 1,346,965,201 474,315,099 75,244,068 401,072,386
- ----------------------------------------------------------------------------------------------------------------------
Undistributed net realized gain (loss)
on investments (4,352,037) 112,217,388 37,948,391 - 38,158,400
- ----------------------------------------------------------------------------------------------------------------------
Net unrealized appreciation or depreciation
on investments 13,114,519 373,651,715 76,530,443 - 66,339,197
- ----------------------------------------------------------------------------------------------------------------------
$250,816,054 $1,833,450,457 $589,164,601 $75,319,387 $505,754,680
=======================================================================
</TABLE>
** Each Fund has 50,000,000 authorized shares except for the Lincoln
National Growth and Income Fund, Inc. which has 100,000,000.
<PAGE>
5. INVESTMENTS
The cost of investments for federal income tax purposes is the same as for book
purposes. The aggregate cost of investments purchased, the aggregate proceeds
from investments sold, the aggregate gross unrealized appreciation, the
aggregate gross unrealized depreciation and the net unrealized appreciation of
investments and other financial instruments at December 31, 1995 are as
follows:
<TABLE>
<CAPTION>
AGGREGATE AGGREGATE GROSS GROSS NET
COST OF PROCEEDS UNREALIZED UNREALIZED UNREALIZED
PURCHASES FROM SALES APPRECIATION DEPRECIATION APPRECIATION
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Lincoln National Bond
Fund, Inc. $316,532,400 $300,710,759 $ 13,617,673 $ (503,154) $ 13,114,519
Lincoln National Growth
and Income Fund, Inc. 956,735,084 746,186,273 419,990,161 (46,338,446) 373,651,715
Lincoln National Managed
Fund, Inc. 588,376,075 576,174,240 85,821,159 (9,290,716) 76,530,443
Lincoln National Special
Opportunities Fund, Inc. 430,824,124 358,721,194 84,294,639 (17,955,442) 66,339,197
</TABLE>
6. SUPPLEMENTAL FINANCIAL INSTRUMENT INFORMATION
OPTIONS: The Funds purchase or write options which are exchange traded to hedge
fluctuation risks in the price of certain securities. When the Funds write a
call or put option, an amount equal to the premium received is reflected as a
liability. The amount of the liability is subsequently "marked-to-market" to
reflect the current market value of the option written. The premium paid by the
Funds for the purchase of a call or put option is recorded as an investment and
subsequently "marked-to-market" to reflect the current market value of the
option purchased. The Funds are subject to the risk of an imperfect correlation
between movement in the price of the instrument and the price of the underlying
security or transaction. Risks may also arise due to illiquid secondary markets
for the instruments. Written call option activity for 1995 is summarized as
follows:
<TABLE>
<CAPTION>
LINCOLN NATIONAL SPECIAL
OPPORTUNITIES FUND, INC.
--------------------------
NUMBER OF PREMIUMS
SHARES RECEIVED
--------------------------
<S> <C> <C>
Options outstanding at January 1, 1995 125,400 $ 204,656
Options written 2,455,200 11,009,524
Options exercised (399,500) (2,744,150)
Options expired (134,800) (241,498)
Options closed (2,046,300) (8,228,532)
------------------------
Options outstanding at December 31, 1995 0 $ 0
========================
</TABLE>
FINANCIAL FUTURES CONTRACTS: The Funds may purchase or sell financial futures
contracts, which are exchange traded, to hedge fluctuation risks of adverse
changes in exchange markets or interest rates. Financial futures contracts
obligate the Funds to take delivery or deliver a financial instrument at a
future date at a specified price. The Funds deposit with its custodian a
specified amount of cash or eligible securities called "initial margin" or
"variation margin". The market value of investments pledged to cover margin
requirements for open positions at December 31, 1995 was $704,993 for the
Lincoln National Special Opportunities Fund, Inc. The unrealized gain or loss
on the contracts are reflected in the accompanying financial statements. The
Funds are subject to the market risks of unexpected changes in the underlying
markets and interest rates; however, such changes in the value generally are
offset by changes in the value of the items being hedged by such contracts.
Purchased financial futures contracts open at December 31, 1995 were as follows:
<TABLE>
<CAPTION>
UNDERLYING EXPIRATION UNREALIZED
FUND CONTRACTS FACE AMOUNT DATE LOSS
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Lincoln National Special 85 S&P 400 midcap stock index $9,505,890 March 1996 $(238,765)
Opportunities Fund, Inc.
</TABLE>
INDEXED SECURITIES: The Funds may invest in indexed securities whose value is
linked either directly or inversely to changes in foreign currencies, interest
rates, commodities, indices, or other reference instruments. Indexed securities
may be more volatile than the reference instrument itself, but any loss is
limited to the amount of the original investment.
<PAGE>
7. CONCENTRATION OF CREDIT RISK
The Lincoln National Money Market Fund, Inc. had investments in securities
issued by banks, including foreign banks, foreign branches of domestic banks,
and other financial institutions representing 40.5% of net assets at December
31, 1995. The ability of these entities to meet their obligations may be
affected by economic conditions related to the industry.
8. SUMMARY OF CHANGES FROM CAPITAL SHARE TRANSACTIONS
<TABLE>
<CAPTION>
SHARES ISSUED UPON NET INCREASE (DECREASE)
CAPITAL REINVESTMENT OF CAPITAL SHARES RESULTING FROM CAPITAL
SHARES SOLD DIVIDENDS REDEEMED SHARE TRANSACTIONS
------------------------------------------------------------------------------------------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
--------- ------------ --------- ------------ ----------- ------------ --------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Year Ended December 31,
1994:
Lincoln National Bond
Fund, Inc. 927,405 $ 10,546,350 1,738,841 $ 21,824,702 (2,659,758) $(30,846,917) 6,488 $ 1,524,135
Lincoln National Growth
and Income Fund, Inc. 6,010,672 141,925,232 2,859,641 69,491,281 (899,760) (20,966,914) 7,970,553 190,449,599
Lincoln National Managed
Fund, Inc. 2,079,210 27,714,248 2,489,916 34,885,204 (1,428,741) (18,553,349) 3,140,385 44,046,103
Lincoln National Money
Market Fund, Inc. 6,670,441 66,704,408 257,051 2,570,514 (7,313,925) (73,139,252) (386,433) (3,864,330)
Lincoln National Special
Opportunities Fund, Inc. 4,246,768 96,029,031 983,331 23,219,317 (2,057,740) (46,218,946) 3,172,359 73,029,402
Year Ended December 31,
1995:
Lincoln National Bond
Fund, Inc. 2,340,450 27,385,295 1,218,139 13,491,950 (901,701) (10,359,540) 2,656,888 30,517,705
Lincoln National Growth
and Income Fund, Inc. 8,053,315 216,522,961 4,377,795 100,769,413 (665,107) (17,108,792) 11,766,003 300,183,582
Lincoln National Managed
Fund, Inc. 2,090,355 30,761,358 1,590,320 20,897,760 (1,201,733) (16,669,755) 2,478,942 34,989,363
Lincoln National Money
Market Fund, Inc. 4,195,254 41,952,539 319,661 3,196,613 (4,700,720) (47,007,202) (185,805) (1,858,050)
Lincoln National Special
Opportunities Fund, Inc. 3,684,568 92,454,762 1,003,269 22,445,188 (584,289) (13,691,215) 4,103,548 101,208,735
</TABLE>
9. DISTRIBUTION TO SHAREHOLDER
The Funds declare dividends daily on net investment income and annually on net
realized gains, if any. Dividends are distributed annually.
10. CAPITAL LOSS CARRYFORWARD
As of December 31, 1995, the Lincoln National Bond Fund, Inc. had $4,433,131 of
unused capital loss carryforward for federal tax purposes. The loss
carryforward expires in the year 2002.
11. FUND NAME CHANGE
Effective April 28, 1995, the name of the Lincoln National Growth Fund, Inc. was
changed to the Lincoln National Growth and Income Fund, Inc.
<PAGE>
FINANCIAL HIGHLIGHTS
(Selected data for each capital share outstanding throughout the year)
<TABLE>
<CAPTION>
Income from Investment Operation Less Dividends From:
--------------------------------------- -----------------------------------
Net Net
Asset Realized and Total
Year Value Net Unrealized From Net Net Realized
Ended Beginning Investment Gain(Loss) on Investment Investment Gain on Total
12/31 of Period Income(Loss) Investments Operations Income Investments Dividends
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Lincoln National Bond Fund, Inc.
1986 $11.904 $1.192 $0.780 $1.972 ($1.192) ($0.236) ($1.428)
1987 12.448 1.055 (0.873) 0.182 (1.055) (0.434) (1.489)
1988 11.141 1.053 (0.131) 0.922 (1.053) - (1.053)
1989 11.010 1.027 0.428 1.455 (1.027) - (1.027)
1990 11.438 0.998 (0.240) 0.758 (0.998) - (0.998)
1991 11.198 0.956 0.990 1.946 (0.956) - (0.956)
1992 12.188 0.903 0.052 0.955 (0.903) - (0.903)
1993 12.240 0.758 0.703 1.461 (0.758) (0.250) (1.008)
1994 12.693 0.741 (1.233) (0.492) (0.741) (0.519) (1.260)
1995 10.941 0.803 1.306 2.109 (0.803) - (0.803)
Lincoln National Growth and Income Fund, Inc.
1986 $16.138 $0.544 $2.147 $2.691 ($0.544) ($0.254) ($0.798)
1987 18.031 0.587 2.148 2.735 (0.587) (0.539) (1.126)
1988 19.640 0.540 0.729 1.269 (0.540) (2.997) (3.537)
1989 17.372 0.793 2.859 3.652 (0.793) - (0.793)
1990 20.231 0.512 (0.539) (0.027) (0.512) (1.068) (1.580)
1991 18.624 0.617 5.142 5.759 (0.617) - (0.617)
1992 23.766 0.663 (0.336) 0.327 (0.663) (0.503) (1.166)
1993 22.927 0.610 2.285 2.895 (0.610) (0.519) (1.129)
1994 24.693 0.668 (0.428) 0.240 (0.668) (0.968) (1.636)
1995 23.297 0.701 7.680 8.380 (0.701) (1.221) (1.921)
Lincoln National Managed Fund, Inc.
1986 $11.305 $0.699 $0.943 $1.642 ($0.699) $ - ($0.699)
1987 12.248 0.674 0.352 1.026 (0.674) (0.317) (0.991)
1988 12.283 0.666 0.352 1.018 (0.666) (1.108) (1.774)
1989 11.527 0.798 1.186 1.984 (0.798) - (0.798)
1990 12.713 0.705 (0.334) 0.371 (0.705) (0.438) (1.143)
1991 11.941 0.710 1.906 2.616 (0.710) - (0.710)
1992 13.847 0.653 (0.158) 0.495 (0.653) (0.036) (0.689)
1993 13.653 0.584 0.908 1.492 (0.584) (0.409) (0.993)
1994 14.152 0.628 (0.814) (0.186) (0.628) (0.555) (1.183)
1995 12.783 0.623 3.132 3.755 (0.623) (0.020) (0.643)
Lincoln National Money Market Fund, Inc.
1986 $10.000 $0.662 $ - $0.662 ($0.662) $ - ($0.662)
1987 10.000 0.658 - 0.658 (0.658) - (0.658)
1988 10.000 0.744 - 0.744 (0.744) - (0.744)
1989 10.000 0.909 - 0.909 (0.909) - (0.909)
1990 10.000 0.802 - 0.802 (0.802) - (0.802)
1991 10.000 0.571 - 0.571 (0.571) - (0.571)
1992 10.000 0.354 - 0.354 (0.354) - (0.354)
1993 10.000 0.276 - 0.276 (0.276) - (0.276)
1994 10.000 0.381 - 0.381 (0.381) - (0.381)
1995 10.000 0.570 - 0.570 (0.570) - (0.570)
Lincoln National Special Opportunities Fund, Inc.
1986 $17.233 $0.178 ($0.616) ($0.438) ($0.178) $ - ($0.178)
1987 16.617 0.064 1.316 1.380 (0.064) - (0.064)
1988 17.933 0.060 0.327 0.387 (0.060) (2.659) (2.719)
1989 15.601 0.276 4.904 5.180 (0.276) - (0.276)
1990 20.505 0.236 (1.931) (1.695) (0.236) (1.208) (1.444)
1991 17.366 0.323 7.195 7.518 (0.323) - (0.323)
1992 24.561 0.546 1.106 1.652 (0.546) (0.955) (1.501)
1993 24.712 0.530 2.703 3.233 (0.530) (2.937) (3.467)
1994 24.478 0.565 (0.942) (0.377) (0.565) (1.372) (1.937)
1995 22.164 0.616 6.131 6.747 (0.616) (0.912) (1,528)
</TABLE>
<TABLE>
<CAPTION>
Net Ratio of Net
Asset Ratio of Investment Net Assets
Year Value Expenses Income Portfolio At End
Ended End Total To Average To Average Turnover of Period
12/31 of Period Return* Net Assets Net Assets Rate (000's)
- ----- --------- ------- ---------- ------------ --------- ----------
<S> <C> <C> <C> <C> <C> <C>
Lincoln National Bond Fund, Inc.
1986 $12.448 16.53% 0.52% 9.75% 156.50% $59,449
1987 11.141 (0.47%) 0.56% 9.17% 176.75% 50,795
1988 11.010 9.24% 0.57% 9.41% 183.79% 59,947
1989 11.438 13.23% 0.53% 9.13% 121.19% 91,152
1990 11.198 5.45% 0.53% 9.00% 76.67% 103,845
1991 12.188 17.96% 0.52% 8.32% 72.80% 139,854
1992 12.240 7.68% 0.52% 7.45% 257.27% 168,636
1993 12.693 13.39% 0.50% 6.05% 324.90% 226,150
1994 10.941 (5.01%) 0.50% 6.40% 213.26% 195,010
1995 12.247 19.59% 0.49% 6.90% 139.61% 250,816
Lincoln National Growth and Income Fund, Inc.
1986 $18.031 16.77% 0.50% 3.06% 55.22% $105,781
1987 19.640 14.75% 0.52% 2.78% 142.01% 177,354
1988 17.372 8.06% 0.54% 3.08% 179.88% 209,513
1989 20.231 19.86% 0.50% 4.06% 208.98% 295,399
1990 18.624 1.68% 0.48% 2.79% 59.47% 356,329
1991 23.766 30.83% 0.44% 2.86% 33.59% 581,297
1992 22.927 1.24% 0.41% 2.97% 74.50% 765,457
1993 24.693 13.31% 0.38% 2.58% 60.76% 1,034,105
1994 23.297 0.65% 0.37% 2.85% 76.34% 1,161,324
1995 29.756 39.06% 0.35% 2.64% 51.76% 1,833,450
Lincoln National Managed Fund, Inc.
1986 $12.248 14.03% 0.51% 5.77% 76.05% $78,824
1987 12.283 7.35% 0.53% 5.23% 121.98% 121,167
1988 11.527 8.17% 0.55% 5.71% 166.57% 140,135
1989 12.713 16.00% 0.52% 6.47% 158.73% 182,576
1990 11.941 3.41% 0.52% 5.96% 93.38% 204,310
1991 13.847 22.59% 0.50% 5.53% 22.70% 276,899
1992 13.653 3.69% 0.49% 4.86% 226.66% 343,439
1993 14.152 11.91% 0.45% 4.24% 235.59% 445,040
1994 12.783 (2.42%) 0.44% 4.45% 160.79% 442,140
1995 15.895 30.11% 0.43% 4.37% 112.52% 589,165
Lincoln National Money Market Fund, Inc.
1986 $10.000 9.18% 0.55% 6.71% - $45,932
1987 10.000 8.02% 0.56% 6.50% - 55,093
1988 10.000 5.45% 0.55% 7.21% - 59,160
1989 10.000 7.20% 0.54% 9.09% - 88,551
1990 10.000 7.61% 0.53% 7.94% - 102,399
1991 10.000 7.48% 0.53% 5.79% - 149,555
1992 10.000 4.70% 0.53% 3.48% - 92,472
1993 10.000 4.46% 0.50% 2.76% - 81,042
1994 10.000 3.20% 0.52% 3.82% - 77,177
1995 10.000 4.22% 0.52% 5.67% - 75,319
Lincoln National Special Opportunities Fund, Inc.
1986 $16.617 (2.50%) 0.54% 1.00% 102.32% $43,369
1987 17.933 8.77% 0.56% 0.31% 110.80% 58,866
1988 15.601 3.73% 0.59% 0.39% 73.91% 63,982
1989 20.505 31.92% 0.55% 1.50% 92.56% 75,245
1990 17.366 (7.28%) 0.55% 1.33% 37.50% 83,762
1991 24.561 43.14% 0.53% 1.49% 111.60% 132,753
1992 24.712 6.24% 0.53% 2.35% 128.49% 189,867
1993 24.478 18.31% 0.49% 2.29% 74.11% 273,998
1994 22.164 (1.55%) 0.48% 2.49% 74.63% 318,417
1995 27.383 32.05% 0.45% 2.39% 90.12% 505,755
</TABLE>
*Total return percentages in this table are calculated on the basis prescribed
by the Securities and Exchange Commission. These percentages are based on the
underlying mutual fund shares in which Separate Account C, D, G, and K may
invest. The total return percentages in the table are NOT calculated on the
same basis as the performance percentages noted in the letter at the front of
this booklet (those percentages are based on the change in unit values).
<PAGE>
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
BOARD OF DIRECTORS AND SHAREHOLDER OF LINCOLN NATIONAL BOND FUND, INC., LINCOLN
NATIONAL GROWTH AND INCOME FUND, INC., LINCOLN NATIONAL MANAGED FUND, INC.,
LINCOLN NATIONAL MONEY MARKET FUND, INC., AND LINCOLN NATIONAL SPECIAL
OPPORTUNITIES FUND, INC.
We have audited the accompanying statements of net assets of Lincoln National
Bond Fund, Inc., Lincoln National Growth and Income Fund, Inc., Lincoln National
Managed Fund, Inc., Lincoln National Money Market Fund, Inc., and Lincoln
National Special Opportunities Fund, Inc. (Funds) as of December 31, 1995, and
the related statements of operations, the statements of changes in net assets,
and the financial highlights presented herein for each of the respective years
or periods in the period ended December 31, 1995. These financial statements and
financial highlights are the responsibility of the Funds' management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 1995, by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial positions of the
Funds at December 31, 1995, the results of their operations, the changes in
their net assets, and the financial highlights presented herein for each of the
respective years or periods in the period ended December 31, 1995 in conformity
with generally accepted accounting principles.
/S/ ERNST & YOUNG LLP
Fort Wayne, Indiana
January 24, 1996
